Home | Business News | Browse by Publication | H | HRMagazine

Salaries looking up: as long as signs of economic recovery increase, executives will loosen their grip on pay by 2010.

Article Excerpt
Small signs started appearing months ago: Jobless claims plateaued. Housing statistics improved slightly. Stock market averages gained ground. Productivity increased. The recession appeared to be bottoming out. Consumers seemed to be regaining confidence, and employers appeared ready to loosen tourniquets they had applied to stem their outlays when the economy was reeling.

As they prepare salary budgets for 2010, employers are signaling that they stand ready to award merit increases of about 3 percent--almost back to pre-recession levels, according to Watson Wyatt Worldwide (WWW), a human resource consulting firm headquartered in Arlington, Va.

And HR professionals have leadership roles to play in helping their executive teams navigate the many options available. Some compensation specialists plan to reformulate total rewards packages for positions at every level. Here's how--and why.

Employers' final 2010 compensation plans will hinge on the economy's actual performance, of course, but prospects appear promising. The U.S. economy is expected to expand faster than previously forecast as consumer spending increases in the second half of this year and in 2010. Although job recovery may take longer--employment is typically among the last major indicators to turn positive at the end of a recession--many business leaders say their companies' financial numbers have leveled off. A WWW survey of 179 companies reveals that as of last June, the number of respondents who reported that the worst had passed was nearly double the percentage that reported the same sentiment two months earlier, further boosting employers' confidence for the future.

The Human Resource Agenda

Laura Sejen, WWW'S global practice director of strategic rewards, notes that results from the study show that for 2010 many companies are planning to:

* Cancel hiring freezes. Sixty-two percent of the respondents plan to do so.

* Restore salaries. Fifty-five percent of those surveyed who had reduced salaries plan to roll them back to previous levels.

* Resume matches to 401(k) and 403(b) accounts. While 70 percent of the respondents expect to start matching employees' contributions at pre-recession levels, more than one-third were unsure when they would begin making matches again.

Naturally, experts caution, unforeseen events could push the economy off a recovery path, causing consumers to lose confidence and hold back spending. In that event, Steve Gross, global performance and rewards consulting leader for the Mercer HR consulting firm, headquartered in...