Magazine article Workforce Management

3 Percent Floor No More?: Growth and Profits Have Recovered, but Ongoing High Unemployment, as Well as Fewer Union Members and Strikes, Could Spell Permanently Lower Salary Budget Increases

Magazine article Workforce Management

3 Percent Floor No More?: Growth and Profits Have Recovered, but Ongoing High Unemployment, as Well as Fewer Union Members and Strikes, Could Spell Permanently Lower Salary Budget Increases

Article excerpt

Just as the 2001 recession ended the 4 percent floor for annual budgeted salary increases and ushered in the era of the 3 percent minimum, the recession of 2008-09 might mean the demise of the 3 percent floor.

Budgeted salary increases remained in the narrow range of 3.4 percent to 3.7 percent from 2002 until 2008, according to annual survey data from Hewitt Associates, which is now part of Aon Hewitt. In 2009, they plunged to 1.8 percent, followed by 2.4 percent in 2010, despite a broad recovery in profits and substantial productivity gains. The 2009 budget marked the first time that increases fell below 3 percent since Hewitt began tracking the data in 1976. According to Hewitt, sub-3 percent increases are the "new 'normal' " in base salary spending.

Employers project increases averaging 2.8 percent for 2011, but if they follow long-standing practice, they will trim the projected increase to about 2. …

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