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December 23, 2010

HR Fact Friday: 2011 Compensation Budgets Stabilizing

Filed under: Compensation,Salaries & Pay — Tags: , , , , 6:00 am

U.S. employers’ compensation budgets are likely to remain intact for 2011, and few companies expect to have to take drastic actions such as pay freezes to reduce costs, a November 2010 survey from consultancy Aon Hewitt reveals.

Aon Hewitt’s survey of more than 500 employers found that:

  • Three-quarters of U.S. companies expect to reach or exceed business performance goals by year-end 2010, leading to the stabilization of pay and variable pay budgets in 2011. Most companies (56 percent) made no revisions to their original base salary increase budgets in the latter half of 2010.
  • In 2011, salary increases for salaried exempt workers are expected to be 2.8 percent. This is up from 2.4 percent in 2010 and significantly higher than the record-low pay raises workers saw in 2009 (1.8 percent).
  • Sub-3 percent increases represent the new ‘normal’ in base-pay spending.

In addition, spending on variable pay—performance-based awards that must be re-earned each year—is holding steady. Updated findings show that 2011 spending on variable pay as a percentage of payroll will be 11.6 percent for salaried exempt workers, down slightly from original projections of 11.8 percent.

Lastly, Aon Hewitt’s survey shows that none of the respondents planned to cut pay in 2011, and just 11 percent planned to freeze salaries for salaried exempt and nonexempt workers in 2011, which is similar to 2010, when 12 percent of organizations froze salaries.

 Source: SHRM, Stephen Miller 

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