Despite speculation that an eroding economy would force many companies to cut their salary budgets this year, it turns out that many employers are actually kicking up compensation—and may continue to do so next year as well.

On average, employers are increasing their salary budgets by 3.9 percent this year, according to a survey of human resources, compensation and benefits officials by WorldatWork. It also found that these companies expect to increase salaries by 3.9 percent next year too, easing concerns that employers would put a freeze on wages.

Even with a stalled economy and rising inflation, the WorldatWork survey concludes that as of right now, there’s no indication that the economy is influencing pay, either positively or negatively.

Avalos said employers are increasing their salary budgets to reward workers for solid performance and to stay competitive. These two factors are especially important considering the rising inflation over the past 12 months, which is now swallowing up a larger chunk of workers’ pay increases.

Inflation rose 1.3 percentage points in the 12-month period ending April 30 to 3.9 percent, its highest level in the past 10 years. To counter rising inflation, many employers are not only increasing compensation, but are also adding “flexibility programs.”

Such programs, like telecommuting, allow employees to work from home and save money on transportation costs. In the past year, there has been a 40 percent increase in the number of companies offering such programs, according to WorldatWork.

Source: Mark Bruno of Financial Week and www.workforce.com