Workers—those lucky enough to keep their jobs, that is—will earn significantly smaller raises and bonuses next year, as companies are quickly revising their compensation budgets to control operating costs.
A large number of corporations will cut pay increases in 2009 to the lowest level in years, according to two surveys released Thursday, October 23, that measure the impact of the economic slowdown on payrolls.
One, from consulting firm Hewitt Associates, found that 42 percent of executives at more than 400 large corporations plan to decrease pay raises by 1 percentage point next year. Salary increases are now projected to average 3.1 percent, the lowest since Sept. 11, 2001.
“It’s not so much that companies are looking to cut costs,” said Ken Abosch, head of the compensation consulting business at Hewitt Associates. “It’s that they’re focused on slowing down the growth of their existing expenses.”
Not surprisingly, perhaps, the retail industry is expected to award the smallest raises next year—2.9 percent—while health-care companies are projected to increase salaries by 3.6 percent, the largest hike in pay for workers in any industry.
A separate survey of large corporations conducted by consulting firm Watson Wyatt Worldwide found that about 30 percent have reduced their pay budgets and expect to boost compensation by only 2.5 percent next year, down from the 3.7 percent increase they had originally earmarked.
While it’s sure to be unwelcome news for many workers, it beats the alternative. Watson Wyatt also found that roughly a quarter of large companies are now planning layoffs next year, while another quarter will institute a hiring freeze.
The employment picture, bleak to begin with, appears to be getting worse: New jobless claims jumped by 15,000 the week of October 12—10,000 more than expected—according to data released by the Labor Department on October 23. Total jobless claims now stand at 478,000, close to the levels in late 2001.