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U.S. Base Salary Increases on the Rise for 2011 as Economy Stabilizes, New Hay Group Survey Finds

(January 04, 2011) U.S. employees can expect median base salary increases of 2.8 percent in 2011, according to a new Hay Group survey released today. This compares to median actual base salary increases of 2.4 percent in 2010. Planned increases in 2011 are also at 2.8 percent for management/professional and support positions. Executives and skilled trade jobs come in slightly lower at 2.7 percent.

"Relatively speaking, a forecasted median 2011 base salary increase of 2.8 percent is good news for employees who, over the past two years, saw the lowest salary increases in decades"

"Relatively speaking, a forecasted median 2011 base salary increase of 2.8 percent is good news for employees who, over the past two years, saw the lowest salary increases in decades," said Tom McMullen, Hay Group's North American Reward Practice Leader. "Hay Group's survey also points to a positive trend in organizational staffing. We found that the number of organizations increasing their staffing levels is double that of organizations that are decreasing their staffing levels."

Hay Group's research also indicates that many of the cuts organizations have made to labor costs due to the recession have already happened. The percentage of organizations using or considering significant labor cost reduction items is considerably lower than data reported 18 to 24 months ago.

Percentage of organizations using or considering the following labor cost reduction actions:
    Pay freezes: 18 percent
    Reduced retirement benefits: 17 percent
    Other reduced benefits: 15 percent
    Decreasing staffing levels: 10 percent
    Job sharing: 9 percent
    Furloughs: 7 percent
    Reduced working hours: 5 percent
    Salary cuts: 4 percent

One exception to this trend is the continued emphasis on increasing employee co-pays and scaling back on employer paid coverage. Nearly 50 percent of organizations report either actual recent increases in employee co-pays (or reduced employer paid coverage), or that they are considering doing this in the near future.

"Despite the optimism in our latest data, the contraction in the U.S. economy will not be reversed overnight, and neither will the return to the 3.5 percent to 4.5 percent base salary increases employees were used to receiving for much of the last decade," added McMullen. "Along with modest base salary increases, we will likely see a continued emphasis on variable pay programs, both incentives and bonuses, as organizations emerge from the recession. Organizations are willing to pay for results, but only if they get those results."

An area of concern revealed in the data is the lack of differentiation in base salary increases between top performers and average performers. Top performers are reported to receive a median 3.1 percent increase versus the 2.8 percent increase reported for the typical employee.

"Organizations have a difficult time differentiating pay increases when the pot of money gets smaller," said McMullen. "Couple this with the ineffectiveness of many line managers in assessing employee performance and undifferentiated pay is the outcome. Managers have an opportunity to utilize their suite of 'total' reward programs - all of the financial and non-financial rewards that the organization provides - to reinforce the link back to individual and team performance."

About the Survey:
Hay Group's forecast results are based on the latest data available from Hay Group's U.S. database, provided by 468 U.S. organizations in November 2010. Typical respondents to the survey include compensation professionals in the Human Resources departments of small to large size U.S. organizations across a wide range of industries. Hay Group's core compensation database represents compensation practices for almost 3,000 companies and over 6 million employees.

About Hay Group
Hay Group is a global consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective, and motivate them to perform at their best. With 88 offices in 47 countries, we work with over 7,000 clients across the world. Our clients are from the private, public, and not-for-profit sectors, across every major industry and represent diverse business challenges. Our focus is on making change happen and helping people and organizations realize their potential.

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