A 3% raise this year? That's all folks

Survey of employers shows about half of businesses will cut back on salary increases, citing weak economy.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By David Goldman, CNNMoney.com staff writer

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
Have the Fed's rate cuts helped the economy?
  • Yes
  • No

NEW YORK (CNNMoney.com) -- Millions of American workers will face miniscule pay raises in 2009, as employers look to cut costs amid an ongoing recession, according to a recent survey.

The semi-annual study conducted by Hewitt Associates, a human resources consulting and outplacement company, found that 50% of the 640 large companies it surveyed said they are planning on reducing labor costs. A quarter of employers said they are considering cuts.

The 640 businesses surveyed employ nearly 13.5 million workers, so the planned pullback in raises could affect between 7 million and 10 million employees, according to the survey.

Those companies cutting back are expected to reduce raises to less than 3% for the first time in the study's 32-year history. Salaried, overtime-exempt employees will get average raises of 2.5% next year, down from projections of 3.8% in July. Raises for salaried nonexempt workers will average 2.6%, down from 3.7%. And salaries for executives will rise just 2.2%, down from 3.8% in the middle of 2008.

"Clearly, many organizations and some industries are being negatively impacted by the economy, and short-term adjustments to reduce fixed costs are required to avoid pay freezes, layoffs, or in some cases, just to survive," Hewitt's practice leader, Ken Abosch, said in a statement.

The automotive industry is forecast to hand out the lowest raises in 2009, averaging just 1.4%, down from projections of 3.5% in July. Auto sector executives will take home even smaller raises, getting just 1.3%, compared to an anticipated 4% in the middle of 2008.

Education jobs will get raises of 2.3% next year compared to 3.5% expected in July. Finance sector employees will see a 2.9% bump in salary in 2009, down from 3.9%.

Still, there are some industries that will take home sizeable pay raises. Construction and engineering jobs are expected to average 4.5%; research positions will take home 4%; and employees at pharmaceutical firms will see a 3.9% bump.

To keep employees on board despite stingy raises, businesses are shifting to performance-based rewards and bonuses, the study showed. Of the companies surveyed, 69% offer such pay incentives, and 24% plan to add similar plans next year.

Still, companies are even scaling back incentive-based pay as a percentage of payroll expenses. Those programs are expected to fall to 11.1% of payrolls for salaried exempt employees from 12.1% in July. For salaried nonexempt employees, incentive-based pay programs will slip to 5.7% from 6.1%, the study said.

"Variable pay programs help organizations ... by allowing employers to more effectively manage fixed costs and focus on key business objectives, while at the same time motivating and rewarding employees for attaining performance goals and contributing to business results," said Abosch. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.