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No pressure to ratchet up pay raises in 2005

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in Compensation and Benefits,HR Management,Human Resources,Leaders & Managers,Management Training

Issue: Even with the economy moving again, employers are playing it safe, budgeting for modest employee pay raises in 2005.

Benefit: By pointing this trend out to senior execs, you position yourself as a strategic player focused on cost savings.

Action: Use this data to work with managers to formulate salary levels for next year. Point employees to this trend if they bark about their raises.

Now that the U.S. economy appears back on its feet, employers may feel pressure to budget much more in 2005 for employee salaries to recruit and retain the best employees.

Our advice: Save your money.

Several new compensation surveys suggest that your organization's competitors will keep pay raises in check for the rest of 2004 and into 2005.

Example: Mercer Human Resource Consulting's annual survey of 1,600 companies says U.S. employers plan to hand out average pay increases of 3.3 percent this year, the same as they granted in 2003. The outlook is slightly higher for 2005, with employers budgeting average pay increases of 3.5 percent.

Here's the 2005 projection, by type of employee (2004 raise levels in parentheses):

Executives 3.7% (3.4%)

Management 3.5 (3.5)

Professional 3.5 (3.4)

Clerical/technical 3.5 (3.3)

Hourly (nonunion) 3.4 (3.3)

If these numbers hold true, 2005 will mark the fourth straight year that average pay increases have fallen below 4 percent, after running in the 4.1 percent to 4.4 percent range for the prior seven years.

Far fewer employers freeze pay levels these days: Only 5 percent reported freezing pay in 2004 for at least some employee segments, down from 12 percent in 2003 and 16 percent in 2002.

Online resources: To help set employee pay, use the Internet to track salary levels in your industry. Some good sites: www.bls. gov/ncs,,, and www.salaryexpert. com.

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