At a time when energy costs are soaring and the U.S. economy is slumping, there is some good news for workers. U.S. companies are planning to keep pay raises steady next year, according to a forthcoming report by Watson Wyatt Worldwide, a leading global consulting firm. The survey also found that one-third of companies have not made any workforce contingency plans in the event the economy continues to falter.

In its survey, Watson Wyatt found that U.S. employers are planning to give workers merit increases that will average 3.5 percent next year, identical to the increase workers received this year and just slightly lower than the 3.6 percent average increase in 2007. Companies also say they plan to provide larger raises to their better-performing employees. Employees whose performance ratings exceed expectations will receive an average merit increase of 4.2 percent, while those who far exceed expectations will receive an average 6 percent increase.

"The economy is no doubt taking its toll on workers, but their 2009 merit increases appear safe - at least for now," said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. "Employees will view holding merit increase budgets steady as a positive sign that will help them offset inflation and higher energy and food costs."

The Watson Wyatt survey also found that 33 percent of respondents have not made any formal contingency plans for future economic downturns. Two out of three U.S. employers, however, have at least one formal contingency planning activity in place. The most common is layoffs (52 percent), followed by plans to restructure their organization (46 percent), freeze the hiring of additional workers (39 percent), give smaller pay raises (27 percent) and freeze salaries (13 percent).

"Given the ongoing economic uncertainty, we were surprised by the finding that so many companies do not have any contingency plans," said Sejen. "We know from previous recessions and economic slowdowns that those companies that have contingency plans in place will be in a much better position to weather the storm and bounce back when the economy improves."

Globally, a vast majority of employers in Asia-Pacific, Europe and Latin America have contingency plans in place. More than eight in 10 employers in Asia-Pacific (84 percent) and Europe (80 percent) have established contingency plans, and seven in 10 (70 percent) of Latin American employers have plans. Six in 10 Canadian employers (60 percent) have adopted a contingency plan to be implemented in the event of further economic decline.

"The economic slowdown is clearly having an effect on companies worldwide and not just in the United States. If economic conditions continue to weaken, we would expect to see many companies begin to evaluate their staffing levels, pay programs and overall organizational structures and to implement some of their contingency plans," said Sejen.