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Personal Finance

Raises to be bigger in '05
Companies expect to pay higher raises -- but not that much higher, according to survey.
September 21, 2004: 1:13 PM EDT

NEW YORK (CNN/Money) - Here's the good news: your pay raise next year should be higher than it was this year. Now the bad news: just barely.

Those are a few of the findings from a recent survey by Hewitt Associates, a consulting firm specializing in pay and other employee issues.

For employees not entitled to overtime, so-called salaried exempt workers, the average raise projected for next year is 3.6 percent, up from 3.4 percent this year, Hewitt's survey of 1,185 companies found. The picture will certainly be brighter in some cities than in others.

For employees who get overtime, also known as salaried non-exempt workers, and for nonunion hourly workers, the average hike is projected to be 3.5 percent, up from 3.3 percent this year.

Executives, meanwhile, can expect the biggest pop: 3.8 percent, up from 3.7 percent in 2004.

"We may never see base salary increases in the mid-to-upper 4 percent range again," Ken Abosch, a senior compensation consultant at Hewitt, said in a statement, referring to the boom years of the 1990s. Pay raises hit 4.3 percent in 2001 and tumbled in the three years thereafter.

"Cost containment is still a focus in 2004, which led to a status quo in base salary increases," he added.

On the bright side, less than 1 percent of companies expect to impose a salary freeze. That's lower than the 3 percent that did so this year.

Location, location, location

Hewitt also found it pays to live in some places more than others.

While the national average for workers not getting overtime is expected to be 3.6 percent, companies in some cities are projecting above-average raises.


In Washington D.C., the figure is 4 percent, in Los Angeles and in Boston 3.8 percent while Dallas and Minneapolis workers are expected to get 3.7 percent.

And predictably, companies in some cities forecast below-average pay hikes: New York (3.4 percent); Atlanta (3.5 percent); Chicago (3.5 percent), and Milwaukee (3.5 percent).

How 'bout them bonuses?

Even though base salary increases are expected to be modest, companies are once again starting to spend more on performance-based variable pay programs.


This year they spent an average of 9.5 percent of payroll; next year, they expect to spend 9.9 percent.

Variable pay is a one-time bonus (or stock award) that is usually based on the performance of the employee, his or her business unit or the company as a whole.

In another survey released in July, Mercer Human Resource Consulting found similar trends for projected raises in 2005.

But the projected raises, based on responses from nearly 1,600 employers, are slightly lower than Hewitt's.

For both overtime and non-overtime eligible workers, pay raises will average 3.5 percent, according to Mercer. Nonunion hourly workers are expected to get 3.4 percent raises.

The average projected raise for executives in 2005 is 3.7 percent, the firm said.  Top of page

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