Staggering Economy Topples 2009 Salary Increases

Business Wire, Nov 3, 2008

25% drop in merit increases in one month brings planned pay raises to lowest level since 9/11--with many employers preparing to delay, reduce, or freeze pay hikes in 2009

OLD SAYBROOK, Conn. -- Business & Legal Reports (BLR([R])) announced survey data today that shows a significant change in the plans of US employers for salary increases in 2009.

A survey conducted this week--the 2009 Pay Budgets Revisited Survey--indicates that the average merit pay increase slated for next year is now 2.80%. That's down almost 25% from the 3.71% increase employers reported in June, when BLR conducted its annual Pay Budget survey.

"The current economic turmoil appears to have claimed yet another victim--pay increases planned for 2009," said BLR CEO Bob Brady. "To see a 25% drop in salary increases, the lowest seen since 9/11, in the space of just a month is unheard of. Let's hope that the markets calm down and confidence improves, but even if they do, BLR expects that most organizations are likely to follow through on these reduced percentages."

As recently as early October, several national salary and benefits surveys were still showing that planned pay increases would hold fairly steady next year. But that was before the Dow Jones Industrial Average plunged more than 2,272 points between October 1 and October 16. Despite a small rebound at the end of the month, markets remain shaky, and the economy continues to face uncertainty.

The results of this week's 2009 Pay Budgets Revisited Survey were sobering: 38.5% of the respondents are changing their pay budget plans because of the economic situation, and another 32.5% said that changes are "under consideration." Only 23.6% said they are not changing their pay budget plans.

"We are just trying to keep the doors open," bemoaned one respondent.

Of the changes being planned by respondents, reducing the pay budget topped the list (37.3%), followed by smaller (or no) increases in an organization's rate ranges (34.4%), a freeze on all raises (24.4%), and delaying the effective date of raises (15.3%).

The survey indicated that merit raises will be highest in larger organizations, while higher cost-of-living increases are planned by smaller organizations:

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The pain and concern caused by the slumping economy was evident in many of the comments accompanying the survey responses:

* "We have had to suffer through losing 33% of our staff this year. We look to reduce it by another 5% by the end of the year. We are hurting ..."

* "Our employees know that nothing may happen [in terms of pay increases] if the economy continues to move down, and [they] appear to understand. Several said they are just glad to have a job and are willing to ride it out."

* "We are an outsourcer in the homebuilding business and need every penny to survive. We are not only freezing increases, but we are cutting back hours for people."

Detailed results of the 2009 Pay Budgets Revisited Survey can be found on BLR's HR Daily Advisor at: http://hrdailyadvisor.blr.com/archive/2008/10/26/Pay_Increase_Survey_ Results_2009.aspx?source=PRS&effort=131

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