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Newsletter DEC 08/JAN 09 I
Over the last 20 years, HRM has been tracking U.S. corporate salary increase budgets via surveys conducted by large management consulting firms such as Watson Wyatt, Hewitt, Mercer, Buck Consultants, etc. These consulting firms survey numerous American companies during the summer of each year for a forecast of what average salaries are to be given in the coming calendar year. Over the past several years, these surveys have been very helpful in helping our clients develop their salary increase budgets. Also, during the last several years, salary budgets have been showing very consistent year-to-year performance at between 3.5% to 4.0%.

However, this year is very different. This year we are finding these surveys have needed to be updated beyond their original forecasts due to the extraordinary economic situation that has recently been occuring. With the Lehman Brothers banking collapse in mid-September providing a trigger for a broader economic crisis throughout the world, the U.S. labor market has moved into very quick decline. With frozen credit markets, declines in corporate revenues and earnings, weak manufacturing and consumer activity, unemployment has risen steadily and may even approach a 10% annualized figure for the U.S. by late 2009.

Thus, the salary surveys compiled during this past summer are not translating very well for this changed economic landscape that we find ourselves in. The following are both original and revised salary budget forecasts.

Buck Consultants

Conducted survey with 314 respondent companies originally. Updated data in Sept. 2008 with 102 of the 314 responding.

ORIGINAL FORECAST (mid-2008)
Non-exempt: 3.8%
Non-management professionals: 3.8%
Executives: 4.0%

NEW FORECAST (16% of total)
Non-exempt: 3.0%
Non-management professionals: 2.9%
Executives: 2.5%

Average salary increases for fiscal year 2008 and increases planned for 2009 are consistent with plans developed last year, despite current economic uncertainty.

102 of the original 314 survey participants responded to the follow-up questions 16 percent of which reported that their plans have either been changed since mid-2008 or are now under review. The 2009 average salary increases for employers revising their plans are: 3.0 percent for non-exempt employees, 2.9 percent for non-management professionals, and 2.5 percent for executives. For companies changing their salary budgets for next year, salary increases have dropped by as much as 30 percent for executives and 19 percent for all other employee groups.

Business & Legal Reports
Conducted follow-up survey in early November 2008 with several hundred companies. This was an update from a June 2008 survey.

All Companies: 2.8%
Companies with 1000+ employees: 3.0%
Companies with 500~1000 employees: 2.74%
Companies with 100~499 employees: 2.86%
Companies with 50~99 employees: 2.70%
Companies with less than 50 employees: 2.59%

The 2009 Pay Budgets Revisited Survey?indicates that the average merit pay increase slated for next year is now 2.80%. That’s down almost 25% from the 3.71% increase employers reported to BLR in June 2008.
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