Pay Raises Next Year Unchanged for Most, but Accountants Will Make Out Fine

September 8, 2008
U.S. companies have budgeted for little or no increase in the average base pay increase they offer employees. This marks the seventh consecutive year that employers do not plan to up the percentage of pay raises. Businesses also expect variable pay levels to fall slightly for the first time since 2003, according to a report from Hewitt Associates.

The good news for finance types: Those who work at accounting firms should see above-average salary increases of about 4.6 percent. Other industries likely to offer bigger-than-average raises include energy and construction/engineering, both with 4.5 percent base pay increases.

But on average, base salary increases for salaried exempt employees are expected to increase to just 3.8 percent in 2009, up slightly from the 3.7 percent average pay raise given this year and in 2007.

Executive employees are projected to receive increases of 3.9 percent, compared with 3.7 percent for salaried nonexempt and nonunion hourly employees and just 3.3 percent for union employees.

Variable pay bonuses—or performance-related awards that must be earned each year—are projected to dip slightly, to 10.6 percent in 2009, down from 10.8 percent this year and 11.8 percent in 2007.

“While the relatively flat projected salary increase may not seem positive, the news is actually promising,” said Ken Abosch, leader of Hewitt’s North American compensation consulting business. “With the current economic climate, we would anticipate seeing lower base pay raises, smaller variable pay awards and more companies freezing wages.

Our findings indicate that companies are making small corrections, but they aren’t panicking—they’re staying the course and remaining relatively stable compared to prior economic downturns.”

Hewitt found that more companies are moving to variable pay programs that include signing bonuses, business-initiative bonuses, special recognition awards and individual performance awards. These programs are seen as a way to motivate employees and recruit and retain top talent.

About 90 percent of the 1,073 large organizations Hewitt surveyed had adopted at least one type of broad-based variable pay plan.

Abosch sees the use of variable pay programs as a good sign for the future.

“Flat variable pay projections for 2009 actually indicate that organizations see a brighter economic picture ahead, which should be encouraging for workers,” he said.

Filed by Matthew Scott of Financial Week, a sister publication of Workforce Management. To comment, e-mail

Workforce Management’s online news feed is now available via Twitter.