Salary Increase?

I woke up the other morning and I turned on the TV. In the morning I watch a local news program to get an idea of the area happenings and weather. During the economy portion of the program (this show follows the formula of short segments followed by more short segments, so the economy portion was only 3 sentences long) the hostess mentioned that a survey conducted by World at Work showed that pay increases were not changing for 2008 – 3.9%. The percentage had gone up every year since 2004.

Because this is a very large survey, the lack of a change, in my opinion, is due to the earnings results that just came in about a month ago. The credit crunch is resulting in people having less of an opportunity to spend, particularly on new homes that need new appliances and accessories. This leads to many companies having less revenue, so to make their numbers they need to hold costs.

What I noticed in the survey is that it didn’t include promotional adjustments, only merit increases, cost of living increases, and general increases. This makes sense as a baseline. I would like to see a survey that shows the average promotional increase. From there you can pair it with the performance based compensation (bonuses) and come up with a true value of earning that promotion. If that number isn’t high enough, and I believe that everyone inherently knows the range of what that number is, then there isn’t motivation to get promoted. If that is the case then an increase of 3.8% or 4.2% doesn’t really matter. The person is content in the job and year over year increases just need to be enough to not motivate the employee to leave the position. If the person is a A+ performer then it is beneficial to reward that through a scheduled, and the seldom used, unscheduled bonus. As long as this person isn’t slotted to be a leader and they don’t want to be one, then this will work fine.

Also noted:

  • As in 2005 and 2006, the largest salary budget increases
    this year are targeted for officers/executives, out pacing workers in
    the three other employee categories, i.e. nonexempt hourly nonunion,
    nonexempt salaried, exempt salaried. In 2007, officers and executives
    experienced salary budget growth above 4% for the first time in six years.
  • Companies
    with fewer than 500 employees reported the highest actual salary budget
    increase in 2007 at 4.1%. The biggest companies (more than 20,000
    employees) reported an increase of 3.7%.
  • Among major
    industries surveyed, public administration had the largest actual
    salary budget increase (4.3%) this year. The smallest increases (3.7%)
    were found in the transportation/utility and retail sectors.
  • The
    percentage of organizations using variable pay increased slightly from
    79% in 2006 to 80% in 2007, continuing a steady upward trend in the use
    of compensation that is contingent on performance or results achieved.

Quick notes on this:

Bullet one – Maybe I am cynical, but Executives and Officers probably don’t have salary growth above 4% because it doesn’t make sense to use that compensation vehicle when the image repercussions are only negative. Variable pay easily achieves the compensation goal and is seen as less of an issue for reporting purposes.
Bullet two – It makes sense for a small company to pay more. Many of the employees are performing several roles anyway. If they giving these type of raises then the productivity is probably higher, which results in greater revenue.
Bullet three – This one is my favorite. I wrote an entry about the government hiring and his falls directly in line with that.
Bullet four – Variable pay is going to continue and I think it will increase in its adoption, and we are already at 80%. Today’s worker is becoming more independent and entrepreneurish, realizing that greater return is given those that create unique worth.

About benleeson
My name is Ben Leeson. I currently work for a large financial company in IT. I went to school at Marist College in Poughkeepsie, NY. I graduated with a B.S. in Business Administration concentrating in HR. Professor William Brown taught me and I enjoyed his classes; even acquiring an appreciation for just about all things HR. I didn’t pursue a job in that field after college but I’ve kept up with it. This blog will further my fascination with all things HR. I hope to grow my knowledge of the area through thoughtful writings and spirited feedback. I will attempt to have a fairly routine style so anyone reading can come to expect certain segments. Please excuse my incorrect grammar and occasional misspelling.

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