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As 2005 approaches, employers continue to search for top talent by augmenting traditional pay programs to create total reward packages. Total reward packages are designed to offer the appropriate balance of pay, benefits and career development based on the unique needs of each workforce. The shift to total reward packages indicates that salary increase budgets will remain stable at 3.5%. The 2004/2005 US Compensation Planning Survey, conducted by Mercer HR Consulting, reports employers are projecting average increases of 3.5% for 2005 (refer to Table 1.1). WorldatWork (WaW), the leading compensation, benefits and total rewards professional association, projects similar 2004/2005 salary increase budgets for nonexempt hourly (non-union) at 3.6%; nonexempt salaried at 3.6%; exempt salaried at 3.7% and officers/executives at 3.8%.

Table 1.1: Merit Increases 2004/2005 by Employee Type
  Mercer 2004-1 WaW
2004-2		 Mercer 2005-1 WaW
2005-2
Employee Type Actual Actual Actual Actual
Executive 3.7 % 3.6% 3.7 % 3.8 %
Management 3.4 % 3.6% 3.5 % 3.7 %
Technical/Professional 3.4 % 3.6 % 3.5 % 3.7 %
Nonexempt clerical/technical 3.3 % 3.4 % 3.5 % 3.6%
Non-union hourly 3.3 % 3.5 % 3.4 % 3.6%
Avg All Employee Types 3.4 % 3.5 % 3.5 % 3.7 %

 

In addition, the Conference Board, a non-profit economic research organization, reports average salary increase budgets of 3.5% across the nation. This will be the third consecutive year in which average salary increases were below 4%. Some interesting statistics on salary increases from previous years:

  • From 1994 through 2001, annual pay increases ranged from 4.1% to 4.4%. However, in 2002 they dropped below 4% and have remained below the 4% threshold through 2005.
  • The Conference Board estimates that inflation increased by 2.2% in 2004, compared to a 3.5% average salary increase budget offering employees an increase in purchasing power of 1.3%. However, the Board projects inflation will increase by 2.7% in 2005 narrowing the purchasing differential to less than one percent.
  • Fewer employers are expected to freeze pay levels in 2005. The number of employers reporting salary freezes dropped from 16% in 2002, 12% in 2003 to just 5% in 2004. Mercer reports that

 


 

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