Base Salary Increases at Lowest Levels: Hay Group

United States employees can expect pay increases of 3.0% in 2010, according to a new Hay Group study. Planned increases at 3.0% are consistent for executives, middle management, supervisory and clerical positions. After factoring in the consumer price index growth forecast for 2010 at 1.3%, the result is a ‘real’ gain of 1.7%.

This is the lowest planned increase in the last decade, but it reflects an uptick relative to a Hay Group survey in March 2009, when organizations indicated planned salary increases were a median of 2.0% for all employees and 0% for executives. This may indicate a positive opinion from organizations regarding the relative health of the overall economy and their organizations in 2010.

The research found that base salary increases are healthier in select industry sectors, such as healthcare, energy and consumer goods.

“While these numbers are lower than we’ve seen in recent years, the primary concern for most employees right now is job security,” said Tom McMullen, U.S. Rewards Practice Leader for Hay Group. “Relatively speaking, a smaller base salary increase is not as concerning to employees as is continuing employment.”

From management’s perspective, organizations report their biggest concern is in maintaining employee engagement levels during this period of challenging business performance, layoffs, low-to-no base salary increases and reduced levels of bonus/incentive compensation.

“Managers are struggling with how to maintain a motivating work environment in the midst of layoffs, base salary freezes and lower bonuses. Recognizing employee’s contributions and ensuring meaningful and impactful work opportunities in a healthy work climate can go a long way in this economic environment,” said McMullen.

About the Survey: Hay Group’s forecast results are based on the latest data available from Hay Group’s U.S. database, provided by more than 400 U.S. organizations from March through June 2009. This is Hay Group’s 29th year of conducting the survey. Typical respondents to the survey include compensation professionals in the Human Resources departments of small to large size U.S. organizations across a wide range of industries. Hay Group’s U.S. database represents compensation practices for 2,259 companies and over 5.6 million employees.