Paychecks in '08: No big bump

With any luck, you may make more next year, but how much will depend far more on your bonus than your base.

By Jeanne Sahadi, senior writer

NEW YORK ( -- Compensation experts are predicting average base pay increases below 4 percent next year - and a lot of that may go to higher health insurance costs, according to early estimates.

If you want to fatten your paycheck in 2008 without changing jobs, your best bet rides on the bonus. And now is the time to shine on the job if you want to secure a big one on top of your annual pay raise.

QuizlaunchTake the quiz
Do you deserve a raise? Before asking, know your strengths and weaknesses.

1. If you left the company, how easy or hard would it be for the company to replace you?
Easy      Hard

This quiz is adapted from Are You Paid What You're Worth?, by Michael O'Malley (Broadway Books, $15).

Managers will make their pay decisions for next year sometime between September and November, said Ken Abosch, the head of human resource consulting firm Hewitt Associate's compensation practice. "Experience tells us there's a 'What have you done for me lately?' effect. It never hurts to finish strong," he said.

Base pay increases are expected to be modest at best, even for star players. Since base pay is one of a company's largest expenses, there's a big push to keep a lid on fixed costs, Abosch said.

Hewitt and Mercer Human Resource Consulting each are surveying up to 1,000 companies, and their preliminary findings suggest base pay will increase by an average of 3.8 percent

In theory, managers may give more to their best performers and less to their worst performers, so long as their department's average raise doesn't exceed the company's. "But the reality is companies don't do a good job taking money away from average or below average employees. The net result is like spreading peanut butter across the organization," Abosch said.

But even if companies were better at apportioning pay increases to better reflect performance, the increase isn't likely to rock your world. "Frankly, 4.2 percent versus 3.8 percent is not a real reinforcement of the message for you to spend that extra energy. The real action is in variable pay," Abosch said, noting that last year companies budgeted three times as much for bonus pay as they did for base pay increases.

Typically, Abosch sees bonuses ranging from 5 percent of pay up to 40 percent, and not just in sales jobs. The lower end of the range is usually reserved for entry-level employees, the mid-level range (15 percent to 20 percent) for middle managers and professionals, and the high end (30 percent to 40 percent) for upper-level management.

Of course, not every company makes their bonus program transparent. They just announce what you got when they pay it out, as if they just discovered an extra pot of money and decided to dole it out. That doesn't do a very good job of communicating the tie between your performance and your pay.

If at this point in the year, you're not clear what is expected of you to earn the maximum base pay increase and bonus, talk to your manager about it.

Here's to your health

If you need added incentive, consider this: Your share of health care costs at work very likely will rise and eat up a significant portion of your base pay bump.

"In general we're still seeing double-digit increases in healthcare costs. And most employers are passing the majority of that increased cost directly to employees," Abosch said.

Last year, for instance, premium costs grew at more than twice the level of wage growth and inflation - and that was the slowest rate of growth since 2000, according to the Kaiser Family Foundation.

Looking ahead, a Hewitt analysis of HMO rates at 160 large companies found that initial 2008 rate increases for HMOs were averaging 14.1 percent - though that may come down a bit after negotiations.  Top of page