Workforce.com

Wage Freeze Not This Year and Probably Not Next, Employers Say

August 6, 2008
Despite speculation that an eroding economy would force many companies to cut their salary budgets this year, it turns out that employers are actually kicking up compensation—and may continue to do so next year as well.

On average, employers are increasing their salary budgets by 3.9 percent this year, according to a survey of human resources, compensation and benefits officials by WorldatWork. It also found that these companies expect to increase salaries by 3.9 percent next year too, easing concerns that employers would put a freeze on wages.

“Clearly, that’s not the case at all,” said Alison Avalos, practice leader at WorldatWork, a global human resources association. “As of right now, there’s no indication that the economy is influencing pay, either positively or negatively.”

Avalos said employers are increasing their salary budgets to reward workers for solid performance and to stay competitive. These two factors are especially important considering the rising inflation over the past 12 months, which is now swallowing up a larger chunk of workers’ pay increases, Avalos added.

Inflation rose 1.3 percentage points in the 12-month period ending April 30 to 3.9 percent, its highest level in the past 10 years. To counter rising inflation, many employers are not only increasing compensation, but are also adding “flexibility programs.”

Such programs, like telecommuting, allow employees to work from home and save money on transportation costs. In the past year, there has been a 40 percent increase in the number of companies offering such programs, according to WorldatWork.

“Pay has gone up, but it’s about more than just compensation for both employers and employees these days,” Avalos said. “It’s now about the total package.”

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.