U.S. salary increase budgets remain historically low, but projections for 2011 show a modest increase, according to The Conference Board annual salary increase budgets survey report, released July 13, 2010. For the second straight year, the median salary increase budget in 2010 is 2.5 percent. Projections for 2011 show a modest increase to 3 percent.
Salary increase budgets refer to the pool of money that an organization dedicates to salary increases for the coming year. It is represented as a percentage of current payroll and calculated using a predetermined total percentage of base pay (excluding overtime, bonuses, etc.).
“This less-than-robust increase is an indication that the economic recovery has not yet picked up enough strength to significantly raise salary budgets to a level consistent with a healthy economy,” said Christopher Woock, human capital researcher at The Conference Board, a business membership and research association. “But the news is not all grim," he added. "There appears to be little risk of inflation eroding the real value of the increase.”
Across all industries, the 2011 forecast for salary increase budgets showed little variation, with no employee group in any industry projected to exceed the overall median of 3 percent.
The projections for 2011 salary increase budgets are up from the actual 2010 increases, according to the report. The largest year-over-year projected increases are in the diversified services industry—where the projected 2011 median salary increase budget is 0.5 to 3 percentage points higher than the actual 2010 budget—and in the diversified financial services industry—where the projected 2011 median salary increase budget is 0.5 or 0.63 percentage point higher than the actual 2010 budget. Among other sectors:
• The transportation industry is expected to have the lowest median salary increase budget for 2011—2.25 percent for exempt employees and executives.
• The insurance industry also is below the 3 percent median overall forecast increase for non-exempt salaried, exempt, and executives.
• The banking sector reported the lowest projected 2011 increase for non-exempt, hourly employees.
More Pay for Performance
Pay for performance continues to be the common approach for the allocation of salary increase budgets as companies remain focused on high-performing employees and growth businesses. While most companies have not budgeted general increases, overall merit increase percentages for 2010 actual and 2011 projected budgets mirror the trend of those of total increases.
The information for the report was gathered from 313 U.S. companies surveyed April 7-30, 2010.
Forecast: Imminent Growth Slowdown in the U.S.
"As the rebound effects from the recession have almost entirely dissipated, a growth slowdown starting in the summer of 2010 is becoming increasingly apparent," says Bart van Ark, chief economist at The Conference Board.
Gross domestic product (GDP) growth for the second quarter of 2010 "might turn out to be the highest for the year, and even here there is a downside risk of the consumer data coming in lower than currently forecasted, despite an uptick in April (and March)," according to van Ark. There are no signs of a “double dip” recession, however, he notes, as The Conference Board Leading Economic Index for the United States points to continued, though slower growth for the rest of this year.
"Weak consumer confidence, slow job growth and flat confidence levels among CEOs, just to mention some of the latest data points, all support the slow growth scenario," according to van Ark. "We also find that there has been a significant re-pricing of credit risk suggesting that financial markets are also weighing lower growth prospects. "Altogether we expect GDP growth in a range of 1.5 to 2 percent in the second half as a result of slow consumer spending, weaker investment growth and a significant cutback in government spending."
Stephen Miller is an online editor/manager for SHRM.
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