The Astron Road Show

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The Astron crew hits the road once again!  When will we be in your neighborhood?  Check out the list below for upcoming events and dates in the next two weeks.

National Director Mike Maciekowich will present at 2 upcoming events.  You can stop by and say hello to Mike at the Upstate New York Healthcare Human Resource Conference September 13 – 15.  The event will be held at the Lodge at Woodcliff Hills.  For our readers in the South, Mike will present a session at the Mid-South Compensation Association’s Annual Seminar on September 20^th.  The event is held in Memphis, so we’ll keep our readers abreast of any Elvis sightings.

On September 26^th Mike and several members of the Astron team will be exhibiting at the AHHRA 2006 Healthcare Human Resources Conference in New York City.  Come on out and explore Astron’s new web-based performance management, succession planning, and merit increase modeling tools!

National Director Jennifer Loftus will present to the HR/NY Not for Profit Special Interest Group on September 15^th.  The meeting, which takes place in New York City, is free to HR/NY members.  On September 21^st, Jennifer will present to New York City’s chapter of PANO, an association of HR Professionals working in non-profit organizations.

 

Drum Roll Please…Market Budget Predictions for 2007

 

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As we mark the end of the summer with the passing of Labor Day, and the streets fill with school buses, Human Resource professionals await the 2007 market salary budget projections.  2006 has been a bit of a surprise in that inflation, fueled by energy costs, accelerated faster than projected last year.  As a result, many employers across the country modified their salary increase budgets to keep pace.  Below is a review from four recently published surveys to bring clarity to a clouded future.

The Conference Board (2006 – 2007 Salary Increase Budgets Survey)  

Pay increases for most salaried workers will average only 3.5% this year, and stay at that level through 2007.  For the fourth consecutive year, salary increases are below 4% as employers keep the lid on budgets.  For all industries as a group and for all three employee groups (nonexempt, exempt, and executive) 2006 salary budgets are virtually identical to last year’s projections.  Pay increases in diversified financial services and insurance were slightly higher than projected; diversified service was slightly lower.

Estimates for 2007 for all industries and for all employees show salary hikes staying at 3.5% with the exception of the executive group, which is projected to move 3.8%.  This pattern persists in the individual industry sectors, with six out of seven projecting higher increases for executives in 2007.

Inflation is projected to be less than median salary budgets in both 2006 and 2007.  The Conference Board currently projects a 3.1% rise in inflation for 2006 and 3.3% for 2007. 

Median salary structure adjustments were under 3% for the fifth year in a row.  As a reminder, salary structure adjustment is the movement, up or down, of pay ranges established by organizations for the hierarchy of jobs.

Hewitt Associates (2007 Salary Increase Survey)

Hewitt's survey of 1,028 large organizations, representing almost 500 million employees, reveals that salaried exempt employees can expect base salary increases of 3.7% next year, the highest increase in five years, but only a modest increase from this year's 3.6%.  Executive employees are projected to receive 2007 increases of 3.8%, compared with 3.6% for salaried non-exempt and non-union hourly, and 3.3% for union employees.

In 2006, actual company spending on variable pay as a percentage of payroll is 11.2%, more than three times the 2006 average base pay increase.  Spending on variable pay in 2007 is projected to remain strong at 11.0%.  Variable pay has grown in prevalence since the early 1990s, with 80% of responding companies currently offering at least one type of broad-based variable pay plan, compared with 51% in 1991.  According to Hewitt's study, special recognition awards are the most common award (63%), followed by business incentives (62%), signing bonuses (62%), individual performance awards (44%), non-executive equity awards (44%) and retention bonuses (35%).

Hewitt's study shows that salaried exempt workers in some major U.S. cities and industries should realize salary increases are somewhat higher than the national average projections for 2007, including Houston (4.7%), Washington D.C. (4.5%), Denver (4.4%), Los Angeles (3.9%), Atlanta (3.8%), and San Francisco (3.8%).  The industries experiencing above-average salary increases include energy (4.5%), construction/engineering (4.1%), and aerospace (4.0%).  The lowest industry average salary increases are projected to be computers and related products (3.2%), metals (3.2%), forest and paper products/packaging (3.3%), rubber/plastics/glass (3.3%), education (3.3%), and entertainment/communications/publications (3.4%).

William M. Mercer

U.S. employers are planning to increase base salaries by 3.7% this year, just a bit higher than the average 3.6% rise they granted in 2005, according to a survey by Mercer Human Resource Consulting.  The modest pay increases have been the trend for the past several years — hovering between 3.3 and 3.8% since 2002, according to Mercer's data.

If the projections play out, workers' wages could fall behind creeping inflation.  The Labor Department's overall Consumer Price Index picked up in the second quarter, pushed higher by record energy prices, and is on pace for a 4.7% rise in 2006, a little more than a percentage point higher than 2005's 3.4%. 

Of the 950 employers surveyed by Mercer, representing nearly 12 million workers, about 85% said they plan to offer short-term incentives in 2006.  A quarter said they increased the number of employees eligible for cash awards, and a quarter said they're giving bigger awards.  Only about 5% decreased the number of employees eligible and the amount of cash given.  

WorldatWork

The WorldatWork annual survey is the largest and most comprehensive salary budget survey, with nearly 2,800 participants from America's largest corporations representing 15 million workers.

According to the survey, salary budgets are on the rebound.  After seeing pay increase budgets sink to historic lows in 2003 and 2004, participating organizations in the 33rd annual WorldatWork Salary Budget Survey are reporting an actual average increase of 3.8% for all employee categories for 2006, and are projecting 3.9% for 2007 (up from 3.7% in 2005).   The increase for 2006 is slightly above the Consumer Price Index (CPI) of 3.5%.  The 2006 numbers are right on target with the projected 2006 figures reported last year.

The Public Administration sector shows the highest average budgeted increase for 2006 of 4.1%, after experiencing the smallest increases in salary budgets from 2002 to 2004.  By organization size, companies with fewer than 499 employees had the highest salary budget increases at 4.2%.  Among major metropolitan areas, organizations in Washington, DC report the highest 2006 salary budget increases for all employee categories and industries, at 4.0%.

For the second consecutive year, participating organizations are reporting that 92% of employees are expected to receive an increase in base pay this year.  Base pay increases may come from general or cost of living increases, merit increases, or other increases.  Promotional increases are excluded.  

The actual salary structure increases in 2006 averages 2.6% across all employee categories.  For the first time in five years, salary structure increases in 2006 met the projections made the previous year, and delivered significant actual increases from the 2005 average of 2.2%. 

While these three sources may vary to a certain degree it is apparent that salary increase budgets will target between 3.7% and 4.0% in 2007.  Astron Solutions uses budget levels between 3.7% and 4.0% when factoring data for clients.  As always, it is imperative that human resource and compensation professionals review specific jobs in specific market and regions, as these general surveys do not account for local market shortages and influence.