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Benefits December 15, 2009
Compensation Programs Suffer in Down Economy
December 15, 2009 (PLANSPONSOR.com) – The victims of the recession in terms of employee pay and benefits were employer compensation programs, according to new research from Deloitte.
Reported by Rebecca Moore
At least 85% of surveyed companies will not provide
standard merit increases on base salaries in 2009, according to a press release.
Surveyed executives fare somewhat worse than other employees, with two out of
three seeing either no increase in base salary or a salary reduction (compared
to 54% for other employees).
Looking ahead to next year, 30% of surveyed executives
anticipate standard base salary increases of 3% to 5% for employees, and 28%
expect similar raises for executives. A majority of survey respondents (54%)
plan to make smaller than normal salary increases for employees next year while
44% indicate executives can expect a smaller salary bump.
In addition to the tight rein on base pay increases, more
than six out of 10 executives (64%) surveyed reported their companies plan to
award bonuses below target this year, the press release said. Twenty percent reported
they plan to forego bonuses altogether — double the number of companies that
cut out bonuses last year.
However, 36% project annual bonuses at or above target —
a strong minority but still a decline from 41% in 2008. More than half (52%) of
the executives who participated in this survey reported bonuses will be smaller
than in 2008, compared to just 20% who believe they will be higher.
As part of their overall compensation strategies, 67% of
the companies participating in the survey offer long-term incentives to
motivate and compensate high-performing employees and executives, Deloitte
found. Among surveyed companies offering long-term incentives to motivate and
compensate high-performing employees and executives, 64% grant stock options;
67% award restricted stock; and 45% offer multi-year performance plans payable
in cash or stock.
With stock prices recovering, 55% of surveyed executives
report that the value of long-term incentives granted in 2009 will meet or
exceed the value of 2008 grants, but nearly one-third (29%) indicated grant
values will drop from last year.
On a positive note, a sizable minority of companies
report that they are taking steps now to rebalance their compensation
portfolios ahead of an economic upturn. In addition to adjusting bonus
pools and stock options, and increasing restricted stock grants, some surveyed
executives are also improving base pay, paying larger bonuses, and enhancing
long-term incentives, the press release said.
For those survey respondents standard merit increases
will be paid in 2009 for employees (15%) and executives (10%). Approximately 12%
of surveyed executives expect to increase annual bonus payments above 2009
targets, and one in five report this year’s bonus will be above 2008 levels.
Seventeen percent of survey participants report they are
implementing retention programs for senior executives now, 13% report they are
doing so for middle management, and 11% for select business units.
As for how other benefits fared due to the recession, nearly
one in three executives surveyed (29%) stated their companies either decreased
(9%) or suspended (20%) 401(k) matches in 2009.