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Blog: The Business of Management
 

August 11th, 2009

2009 Raises the Lowest in 33 Years

This won’t be surprising to anyone working in this Year of Living Dangerously during the Big, Bad Recession, but Hewitt Associates just released a survey showing just how badly the economic downturn has affected raises and salary increases.

Would you believe that 2009 salary increases were the lowest in 33 years?

Although I’m sure that Compensation Force blogger Ann Bares will have a lot more insight and perspective on this given how much she has already done on some other salary studies and reports, here are the highlights of the Hewitt survey from my point of view:

• Salary increases hit a record low in 2009 at 1.8 percent for salaried exempt employees, down from 3.7 percent in 2008. This is the first time that base salary increases dropped below 3 percent since Hewitt started tracking the data in 1976.

• Hewitt projects that the 2010 increase for salaried exempt employees will be 2.7 percent. That’s below the 3 percent projection for next year that Watson Wyatt projected last month.

• Executive employees saw only a 1.4 percent salary increase in 2009, and the 2010 projection is 2.6 percent.

• Nearly half the companies Hewitt surveyed (48 percent) froze salaries in 2009, up from 2 percent (yes, that’s 2 percent) the year before. Only 13 percent of companies anticipate a salary freeze next year, but more than two-thirds of those organizations also had a freeze in 2009.

• Variable pay in 2009 was the highest level on record. Variable pay spending for salaried exempt employees was 12 percent in 2009, up from 10.8 percent in 2008. For 2010, companies are budgeting variable pay bonuses at 11.8 percent.

“Even during past economic downturns, we have not seen such dismal salary increases as we did this year,” said Ken Abosch, the leader of Hewitt’s North American Broad-Based Compensation Consulting business, in a statement that seemed of accurately capture the dismal nature of things. “It truly is unprecedented.”

Anyone who is still working (and managing) knows that this has been an incredibly difficult year for everyone in the workforce. The Hewitt survey is just yet another piece of evidence that shows not only what we have all been going through but, more importantly, how slowly the recovery is expected to be throughout the coming year.

In other words, we’re in for a long, slow, gradual recovery. Don’t expect any big changes anytime soon.

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