Planned 2.5% Pay Increase Lowest in Last Decade, Study Finds

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Published in World at Work, December 9, 2009

U.S. employees can expect median pay increases of 2.5% in 2010, which is the lowest planned increase in the last decade, according to a new study.
The study by Hay Group found that this amount is one-half of 1% lower than when Hay Group conducted a similar study in July 2009 that forecasted a 2010 median pay budget increase of 3%.
Planned increases are generally consistent for executives, middle management, supervisory and clerical positions. After factoring in the consumer price index growth forecast for 2010 at 1.8%, the result is a ‘real’ gain of 0.7%.
“While these increases are greater than the 1.9% that employees actually received in 2009, the market is still tempering its outlook for 2010 as is evident by the swing from 3% increase budgets in the summer to 2.5% increases today. About a quarter of organizations decreased their salary budget increase estimates in the last four months,” said Mel Stark, vice president in the reward practice at Hay Group. “There are several things at play here,” Stark said. “Many organizations put the brakes on salary increases in 2009 and a number of organizations had salary freezes due to tough economic conditions and company performance. The improved outlook for salary increases is due to both a more positive economic outlook as well as a feeling by management that it is difficult to provide nominal increases to organization workforces who have been asked to do more with less during difficult times.”

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