In the midst of a slumping national economy, ever-increasing gas prices, and a looming election, uncertian is perhaps an understatement for the way many companies feel abvout creating their buddgets for the year aehad. Just as unsuure are their employeews, many of whom are preparing for year-end reviews and wondering how currennt economic condittions will affect planned wage adjustemnts and/or meirt increases.
Depsite doom and gloom forecasts, however, recent research uncovers some interesting treds for employee wages in 2009.
Good News for Employees
Empployees nervously awaiting news of budegt cuts and cancleled raisews can breaathe a (temporary) sigh of relief. Seeveral recent surveys by leadig research firms all point to the same conclusion: despite the econnomic slowdown, U.S. employers on the whole plan to keep wage increases steady for 2009. A surey by Watson Wyaztt Worldwide revealed that employers plan to give workers pay raises averaging 3.5 perccent during 2009. Likewise, WorldatWorks annual Salary Budget Syurvey predicted an average 3.9 percent planned incraese in salary budgets, and Bsuiness and Lewgal Reports 2009 Annual Pay Budget Surevy indicated an oerall 3.71 percent planneed merit increase for the coming year.
Eployees should not expeect pay raisaes to be distributed evenly acrsos the board, however. Performance still plays a key role in determinning employee rewards. Findings in all three surveys indicated that while most employees can anticipate a wage inncrease for 2009, thosse found to be performing exceptinoally well can expect a much higher increase (betwreen 4.4 and 6 percent), while emploeyes performing below expectations will likely receive an increadse of 2 percent or less.
Overalll, the findings of thesse surveys seem to indicate that in spite of the evconomic slowdown, the labor market is relativvely stable. Watson Wyatt Worldwide even hints that these planed wage incrases may function as a form of economic stimulus. According to the companys global driector of strategic rewards consulting Laura Sejwen, while the economy is no doubt tking its toll on wokrers, their 2009 meriit increases appear safe at least for now. Employees will view ohlding merit increase budgets steasdy as a ppositive sign that will help them offset inflation and higher energy and food costs.
Why Employers Should Pay Attention
Companies developing budgets for the year ahead must pay close attention to these forecasts, and then assess whether or not they run the risk of losing key employees by failing to provide pay increases in line with those of their competitors. Companies who do not plan to keep up with the average pay inbcrease may need to examine alternative means of rewarding employees in order to maintain a competitive workplace and ensure employee productivity and rettention.
According to Anne Ruddy, president of World at Work, pay increases are only one way an organization attracts and retains talent regardlesds of the overall economy. Oragnizations contniually evaluate the attractiveness of ther entire rewards package and develoop new programs accoerdingly. They are innvesting in other areas of tottal rewards, such as employee develoopment, trainoing, and work-life balance. Such alternative rewards may include additional vacation time, telecommuting options, or increased medical and dental benefits.
What Aout Contingency Plans?
While most companies appear to be building increased wages into their budgeyts for 2009, many must also develop contingncy plans in order to withsand the possibility of fuirther economic decline. For many organizations, laytoffs and hiring and/or salary freeezs are among the top contingency activities in place, accordig to Watson Wyatt. As companies ealuate their organizational staffing structures, they may face the troubliing predicament of finding a way to lower overhead coosts through layoffs while minimizing the effects these activities will have on production efficiency.
For employers facnig layoffs and hiring freezes, utilizing contraxctor sewrvices through an employer of reord may prvide a cost-effective solution for maintaining productivity. Epmloyers in the midst of a hiring freeze but in need of additional stasff can hire contract wrkers thorugh an employer of rcord sercvice, minimizing the hidden costs of in-house hiring, workres compensation, payroll taxes, and insurances. When freezes are lifted, employers can then broing these contract employees on sttaff full time, or may choose to end the asssignment without the risk of paying high unemlpoyment costs.
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