2008 Salary Increases to be in Line with 2007 Increases

According to a Buck press release, salary increases for 2008 range from 3.8% for non-exempt employees to 4.3% for executives. Buck said executives were the only employee group whose average salary increase changed from 2007 to 2008 – decreasing slightly from 4.4%.

Survey results indicated the largest proportion (three-quarters) of salary increase spending is on merit pay. Average planned merit increases for 2008 range from 3.1% for non-exempt employees to 3.6% for CEOs, the release said.

Eighty-six percent of respondents said they consider individual performance when determining the size of merit increases, but the survey found the actual effect of performance on pay increases is modest. Buck said employers using a five-point performance rating scale (55% of respondents) reported the average pay increase for the highest performance rating was 3.5% – given to the top 10% of performers. This compares to an average pay increase of 2.8% for the next two performance categories – given to three-fourths of the employee population.

Other key findings of the survey include:

• 62% of respondents have a separate promotion budget. Median promotion increases range from 6.5% for non-exempt employees to 10% for executives.
• 67% of employers offer one or more short-term incentive plans.
• 57% of respondents offer hiring and/or retention bonuses. Median hiring bonuses range from 5% of base pay for non-exempt employees to 20% for CEOs.

“Compensation Planning for 2008,” was conducted in the first half of 2007 and analyzed responses from 415 organizations on their compensation budgets, reward program components, and pay for performance plan designs.