|
September
2, 2003
The Astron Road Show
National Director Michael Maciekowich will present on
Innovative Compensation at the Iroquois Healthcare
Association's annual conference. The meeting will be held
September 17 - 19.
Click here to
receive more information on the conference or to request a
copy of Michael's presentation.
And the Magic Numbers
Are... 2004 Merit Budget Projections
It's
that time of year again! Organizations around the country
are preparing their salary budgets for the coming year. In
this Astronology,
we deliver our annual compensation budget forecast.
Our two central sources are Mercer’s
2003/2004 US Compensation
Planning Survey and WorldatWork's indispensable
30th Annual Salary Budget
Report. It is worth noting that Mercer's survey
considers total increases, whereas WorldatWork's survey
breaks their increases down into finer categories (COLA,
merit, etc.).
According to Mercer, pay increases across all employee
groups averaged 3.3% in 2003; prior to 2002, they averaged
over 4% for eight years running. WorldatWork's figures are
slightly higher, citing an actual average salary budget
increase for all employees of 3.5%. In April 2002, a
considerably higher increase of 4.1% was projected.
Organizations participating in the WorldatWork survey also
reported a 3.6% actual budget increase for the
officer/executive category. 2003's survey is the first in
its 30 years that this figure has been less than 4%.
WorldatWork's 2003 total salary increase data for exempt
employees in select industry groupings are as follows:
- Healthcare - 4.0%
- Finance and Insurance -
3.7%
- Retail - 3.5%
- Information - 3.5%
- Manufacturing - 3.5%
WorldatWork also predicts that fewer than 83% of employees
can expect raises this year, compared with 85% in 2002 and
94% in 2001.
Another historic low has been hit in salary structure
increases. In 2003, the average increase to formal base pay
structures is budgeted at 2.1%. Only two-thirds of the
WorldatWork survey's respondents are planning any increase.
On the positive side, 2003 marks a rise in the use of
variable pay. WorldatWork reports that three-quarters of its
survey's respondents have some kind of variable pay program
in place. While actual incentive paid in 2002 was less than
predicted, it represented a slight increase over previous
years: hourly workers with variable pay received an average
5.7% of base pay, management 11.7%, and executives 29.8%.
Mercer reports that roughly half of all nonexempt employees
are eligible for incentive rewards.
Variable compensation has the potential to offset the
negative effects caused by restricted pay raises. A variable
pay program can improve compensation-related morale, as
employees stand to make more money through a merit-based
variable pay system than they would with a pay raise. Tying
variable pay to productivity or other measures ensures that
organizations will see increased revenues and decreased
costs as the result of a well-planned variable compensation
system. Tying the money saved through improved performance
to the money paid out as merit-based bonuses ensures that
salary budgets don't increase, creating a win-win situation
for all involved.
Mercer also reports that salary freezes are on the decline:
12% of responding organizations reported salary freezes in
2003, compared to 16% in 2002.
Looking ahead, we see increase projections that are
generally the same or slightly higher than 2003's actual
increases. WorldatWork projects salary budget increases for
all employees of 3.7% for 2004. Mercer's predictions for all
employees are for pay increases of 3.6% (not counting
organizations with salary freezes in effect), with a note
that executives can expect an average raise of 3.7% in 2004.
WorldatWork’s industry-specific projections for exempt
employees in 2004 are as follows:
- Healthcare - 3.9%
- Finance and Insurance -
3.8%
- Retail - 3.6%
- Information - 3.7%
- Manufacturing - 3.7%
While Consumer Price Index (CPI) figures from April 2002 to
April 2003 are low at 2.2%, they are not necessarily
perfectly correlated to low salary increases. The CPI for
1998 was lower at 1.4%, and salary budgets were
significantly higher that year, between 4.1% and 4.6%.
Factors such as the supply and demand of labor for hot jobs
and the effects of geographic region on attracting and
retaining labor also play into wage increases.
The Department of Labor's seasonally adjusted Employment
Cost Index provides the following data on increases in the
cost of total compensation:
- Civilian Workers
- Q1 2002 - .9%
- Q2 2002 - 1.0%
- Q3 2002 - .8%
- Q4 2002 - .7%
- Q1 2003 - 1.3%
- Q2 2003 - .9%
- State and Local
Government
- Q1 2002 - .8%
- Q2 2002 - .9%
- Q3 2002 - 1.3%
- Q4 2002 - 1.0%
- Q1 2003 - .9%
- Q2 2003 - 1.0%
- Private Industry
- Q1 2002 - .9%
- Q2 2002 - 1.1%
- Q3 2002 - .6%
- Q4 2002 - .7%
- Q1 2003 - 1.4%
- Q2 2003 - .8%
The Department of Labor also reports that annual
compensation costs for the civilian workforce increased 3.7%
for the year ended June 2003, compared to a 4.0% increase
the year before. Those figures were 3.5% in 2003 and 4.0% in
2002 for private industry, while State and local government
compensation costs increased 4.1% compared to a 3.6% rise
during the two previous years.
Civilian wages rose 2.7% from June 2002 to June 2003, while
benefit costs rose 6.3% during the same period. Overall,
employer costs for employee compensation in June 2003
averaged $24.19 per hour worked. Of that figure, $17.35, or
71.7%, was spent on wages and salaries, and $6.84, or 28.3%,
was spent on benefits.
More detailed statistics can be found at the
Bureau of Labor Statistics
website.
Coming next time in
Astronology
- Do You Know...
- Effectively Countering
Workplace Violence
Wonder what your fellow readers think about critical HR topics? Is your organization unique from or similar to others?
Click here to view the results of our past polls!
If you have a topic you would like addressed in Astronology, or some feedback on a past article, don't hesitate to tell us! Simply reply to this e-mail. See your question answered, or comments addressed, in an upcoming issue of Astronology.
Looking for a top-notch presenter for your human resource organization's meeting? Both Jennifer Loftus and Michael Maciekowich present highly-rated sessions on a variety of compensation and employee retention issues. For more information, send an e-mail to
info@astronsolutions.com.
Are you reading a pass-along copy of Astronology? Click on
this button
to start your own subscription today!
Send inquiries to
info@astronsolutions.com or call 800-520-3889, x105.
We hold your e-mail address in trust. Astron Solutions promises never to share or rent your personal information. We also promise never to send you frivolous e-mails and will allow you to leave our list, at your option, at any time.
To remove yourself from this list, please follow your personalized subscriber link at the bottom of your Astronology alert e-mail.
Copyright 2007, Astron Solutions, LLC
ISSN Number 1549-0467
|
|