US pay freeze finally thawing

Oct 14 2010 by Brian Amble Print This Article

After almost two years of belt-tightening, there are signs that the great US pay freeze could be thawing. In fact three-quarters (76 percent) of the US employers that froze pay over the last 18 months have lifted their pay freezes or intend to do so by the end of 2010.

A survey of more than 200 American companies by Buck Consultants has found that between seven and eight out of 10 employees can expect pay raises this year.

Executives can expect to fare less well, however, with only 57 per cent in line for a raise.

But any rises that are awarded will be modest. Salary increases for 2011 will average 2.8 per cent, the report predicts, an increase from 2.5 per cent in 2010 and 1.8 per cent in 2009.

"Employees shouldn't expect big gains in pay until there is a sustained economic recovery and significant improvement in the unemployment rate," said Buck's Tom Burke.

"In fact, employers may revert back to pay freezes if economic stability and sustained growth do not occur."

Pay for performance will remain as crucial as ever, with almost nine out of 10 of the organizations participating in the survey subscribing to a pay-for-performance compensation philosophy.

And with mounting concern that employees will start looking for new jobs as soon as the economy improves, it's no surprise that bonus payments in 2010 are expected to exceed those paid in 2009.

The report also found that companies are changing the way they manage base pay, with up to half saying they have reallocated merit funds from low performers to high performers in an effort to retain their best people.