Survey: Pay Freezes Slowly Thawing, but 2011 Raises are Going to be Modest

Managers and HR professionals will have to deal with very modest pay increases in 2011. (Photo illustration by Dreamstime).

Here’s a bit of good news (emphasis on “bit”) that workplace trends are slowly (emphasis on “slowly”) starting to stabilize.

According to a new survey by Buck Consultants, “more than three-quarters (76 percent) of organizations that froze pay during the last 18 months have lifted their pay freezes or intend to do so by the end of 2010.”

The survey also confirmed what everyone else has been saying about salary expectations in 2011: workers can expect modest pay raises next year, with salary increases averaging 2.8 percent, “an increase from 2.5 percent in 2010 and 1.8 percent in 2009,” Buck says.

This falls in line with what Mercer (a 2.9 percent increase), and pretty much everyone else, is predicting will happen with salary increases in 2011. In other words, employees should expect a very modest increase given the nature of the economic recovery.

No big salary gains in sight

“Employees shouldn’t expect big gains in pay until there is a sustained economic recovery and significant improvement in the unemployment rate,” said Tom Burke, principal at Buck Consultants, in a press release issued with the study. “In fact, employers may revert back to pay freezes if economic stability and sustained growth do not occur.”

Tom Burke makes a good point, because the reality of our economy right now is that it is very tenuous, and even a modest projected salary increase for next year can get wiped out if things slide back at all.

The Buck survey also found that pay-for-performance remains a crucial compensation element “given the importance of allocating scarce funds effectively to retain top performers.”

Some 87 percent of organizations participating in the survey say they subscribe to a pay-for-performance compensation philosophy, and the most prevalent type of short-term incentive program mentioned is a company-wide incentive plan with an individual performance component.

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Confirmation of a very slow economic recovery

In addition, the Buck surveys shows that “bonus payments and bonus participation are also on the rise … (and) payments for 2010 performance for executives, directors, managers, and other exempt employees are expected to exceed bonuses paid for 2009 performance.”

None of this is all that surprising, of course, because the Buck survey (and you can buy it here) pretty much confirms what other surveys keep saying: businesses and organizations are slowly restoring what was lost or cut back on during the worst of the recession, but don’t expect any major expenditures because everyone is worried that the economic recovery may not last.

Buck Consultants is a Xerox company. The survey was completed in August and “includes responses from more than 200 employers, representing virtually every sector of the U.S. economy.”

So take this for what it is: a bit of good news that, economically speaking, things are slowly improving. In this economy, that’s probably about as good as it gets right now.

John Hollon is Editor-at-Large at ERE Media and was the founding Editor of TLNT.com. A longtime newspaper, magazine, and business journal editor, John has deep roots in the talent management space. He's the former Editor of Workforce Management magazine and workforce.com, served as Editor of RecruitingDaily, and was Vice President for Content at HR technology firm Checkster. An award-winning journalist, John has written extensively about HR, talent management, leadership, and smart business practices, including for the popular Fistful of Talent blog. Contact him at johnhollon@ere.net, connect with him on LinkedIn, or follow him on Twitter @johnhollon.

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