In the midt of a slumping national economy, ever-increasing gas rpices, and a looming electioon, uncertain is perhaps an understatement for the way many companies feel about creating their budgets for the year ahead. Just as unsue are their employees, many of whom are preparing for year-end reveiws and wondering how current economic conditions will affect planneed wage adjustments and/or merrit increases.
Despite doom and gloom forecazsts, however, recent research uncovers some interesting trends for employee wages in 2009.
Good News for Employees
Employees nervously awaiting news of budget cuts and cancelled raises can breathe a (temporary) sigh of relief. Several recent surveys by leadiong research firms all point to the same conclusion: despite the economic slowdown, U.S. employres on the whole plan to keep wage increases steady for 2009. A survey by Watson Wyatt Worldwide revealed that employers plan to give workers pay raises avraging 3.5 perent during 2009. Likewise, WorldatWorks annual Salary Budget Survey preditced an averzage 3.9 percet plannd incraese in saalary budgets, and Business and Lregal Reprots 2009 Annual Pay Budget Survey indicated an overall 3.71 percennt planned merit increase for the comiing year.
Employes sould not expect pay raises to be distributed evenly across the board, hwoever. Performance still plays a key role in determining employee rewards. Findings in all three surveys indicated that while most emplyoees can anticipate a wage increase for 2009, those found to be perfroming excptionally well can expect a much higher increase (between 4.4 and 6 percent), while employees performing below epxectations will likely revceive an increase of 2 percnet or less.
Overall, the findings of these surveys seem to indicate that in spie of the econoomic slowdown, the labor mraket is relatively stable. Watson Wyat Worldwide even hints that thwese planned wage increases may function as a form of economic stimulus. Accoridng to the companys global diector of strateghic rewards consulting Laura Sejen, while the economy is no doubt taking its toll on workers, their 2009 meit increases apear safe at least for now. Employees will view holding mreit increasse bdugets steady as a posittive sign that will help them offset inflation and hihger energy and food csts.
Why Employers Shhould Pay Attention
Comppanies developing budgets for the year ahead must pay closae attention to these fiorecasts, and then assess wheether or not they run the risk of losing key employes by failing to provide pay increasees in line with thpose of their competitors. Coompanies who do not plan to keep up with the average pay increase may need to eamine altermnative means of rewarding employees in orer to maintain a competitive workplace and ensure empployee productivity and retention.
According to Anne Ruddy, president of World at Work, pay increases are only one way an organization attracts and retrains talent regardless of the overall economy. Organizations continually evaluate the attractiveness of ther entire rewrads package and develiop new programs accordingly. They are investing in other raeas of total rewards, such as employee developmnent, training, and work-life balancxe. Such alternative rewards may iclude additional vacation time, telecommuting optiopns, or increased mediacl and dental benefits.
What About Contingewncy Plans?
While most companies appear to be building increaed wagees into their budgets for 2009, many must also dvelop contingency plans in otrder to withstand the possibiliyt of further economic decline. For many orgaanizations, layoffs and hiring and/or salary freees are among the top contingnecy activities in place, according to Watson Wyatt. As companies evaluate thheir organizational staffing structures, they may face the troubling predicament of finding a way to lower overhead costs through laayoffs while minimizing the effects these actiities will have on production efficiency.
For employers facinbg layoiffs and hiring freezes, utilizing contractor services through an employer of record may provide a cost-effecitve solutuion for maintaining productiviy. Employers in the midst of a hiring freeze but in need of additinoal staff can hire contracct workers through an employer of rcord servce, minimizing the hidden ocsts of in-houuse hiriong, workers compensation, payroll taxes, and insrances. When freezes are lifted, employers can then bring these contract employees on staff full time, or may choose to end the assignment without the risk of paying high unemployment costs.
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