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Being a worker isn't getting any easier. We're moving from traditional pensions to 401(k)s, from full-scale health insurance to consumer-driven health plans and from steady annual salary increases to one-time "pay for performance" bonuses and incentives.
Base salaries are expected to increase about 3.9% on average in 2008, matching the average pay increase in 2007, according to a new Towers Perrin survey of about 4,000 companies worldwide. Those results match a number of other salary-expectation surveys.
It's not much when you consider inflation in October rose at a 3.5% annual rate. But more employers now supplement salaries with one-time bonuses and rewards.
More than 90% of employers offered such "variable pay" this year, up from 80% in 2006, according to an annual survey of about 1,000 large U.S. employers by Hewitt Associates, a human-resources consulting firm.
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Spending on such programs hit almost 12% of employers' payroll budgets on average this year, up from 9% in 2003, and Hewitt expects that figure to top 12% in 2008.
So, there is money available beyond traditional salary increases, but it's only available to certain workers who meet and exceed companies' performance expectations.
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Potential on the upside
"The risk of earning a competitive wage is now increasingly on the employee's shoulders," said Ravin Jesuthasan, a managing principal and practice leader at Towers Perrin."If you go back to the mid- to late-1990s, we saw (salary budget increases) in the 6% to 8% range," but that all changed when the economy tanked after 9/11, Jesuthasan said.
"Compensation (is) often the single largest expense item" for businesses, he said. In uncertain economic times, "more senior leaders are asking, 'How do we get the most out of this investment, and how do we use it as a tool to manage the business?''' he said.
That's where a variable-pay program comes in. It's "a way to deliver those funds without making that long-term commitment (to a fixed salary), and it requires the employee to perform," said Alison Avalos, a practice leader with WorldatWork, an association of human-resources professionals.
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Who doesn't like the certainty of fixed salary? With bonus pay, "when results are there, the company pays out. When they're not there, they don't," Abosch said. But, he argues, bonuses offer "an upside potential that employees don't have with base salaries," he said.
On average, hourly and professional technical employees can expect employers to dole out bonuses of between 5% and 10% of base pay, entry-level professionals and midlevel managers, 10% to 20% of pay, and senior managers through executives, anywhere from 20% to 80% or higher. But of course, that pay is targeted to top performers.
The projected salary increase for 2008 is "very mild growth," said John Irons, director of research and policy at the Economic Policy Institute, a liberal think tank.
And it's surprisingly mild when you consider how robust productivity gains are: U.S. nonfarm workplace productivity jumped at an annual rate of 6.3% in the third quarter, the fastest growth in four years, the U.S. Labor Department reported Wednesday.
"We would hope for wages and salaries to increase with productivity growth . . . but we see productivity growth is stronger while wage growth is weaker," Irons said.
Continued: Averages are misleading
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