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A trio of new salary surveys from top consulting firms—Mercer, Hewitt and WorldatWork—predict that U.S. employers will dole out annual pay raises of about 3.8% in 2008, about the same level as this year. The modest raises outpace inflation, which is currently running at 2.7%.
All three surveys show that more employers are turning to bonuses, rather than higher raises, to reinforce performance, a trend that Hewitt researchers called “the biggest turnaround in compensation practices in 10 years.”
Companies responding to the WorldatWork survey report that they are budgeting 12% of their payroll budget for bonuses.
Most bonuses will be part of variable pay programs where employers provide extra cash to workers who hit specific work-related targets. While base pay remains relatively constant, bonuses create motivating incentives for employees. Employers feel they can reward employees without committing to long-term salary increases.
As with any compensation program, employers must make sure they offer bonuses on a level playing field. All workers within a specific class of workers should have an equal chance at earning the bonus. You’ll want to be especially alert for disparities that unfairly affect protected groups such as women, minorities, the disabled, or workers over 40.
Here are some tips for keeping your bonus program out of litigation:
Final note: Clearly, modest pay increases present retention challenges for employers, but bonus systems offer one way to keep your very best employees.
| '50 Best Small & Medium Companies to Work for in America' nominations close Wednesday, August 22 |
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While cash may always be king, companies are getting creative about other ways to reward and retain employees, while boosting organizational performance at the same time. Last week we brought you tips from the Great Place to Work Institute on retention tips from top companies. Now you’re invited to nominate your own company to become one of America’s 50 best. To access online application information, click here. Nominations close tomorrow. |

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