July 21, 2010 — Well the high level results for yet another WorldatWork Salary Budget Survey (SBS) are out and the good news is that budgets are up to an average of 2.5%. Could they have gone any lower after last year's worst-in-survey-history figure? I suppose they could have since the last 24 months have taken the term "volatility" to a whole new level.
The bad news is, 2.5% still isn't a large bucket of cash with which to reward those employees that are still fortunate enough to still be working. Last year, it seemed the notion of "at least you still have a job" was actually part of the messaging on which the low increases were tempered. This year, however, with the economy at least showing tepid signs of recovery, that may not be enough to keep workers motivated and engaged. Indeed more HR practitioners are indicating that engagement and retention are becoming concerns.
Could this be the beginning of the end for anything more than nominal increase budgets? There are studies to suggest that more of the discretionary increase dollars are being placed in variable pay budgets including incentives, bonuses and recognition. And why not? As the name implies, "variable" should vary with performance and the ability of an organization to pay. On the other hand, base pay still impacts other elements of total rewards, such as incentives (when calculated as a percentage of base pay), DC match amounts, life insurance, etc. So I'm not sure we can just forget about base pay.
Jim, what do you think? Will increase budgets return to the 4%-5% levels of years past?
As tired as I am (perhaps you too?) of the phrase "new normal" that is used to characterize everything post-Great Recession, I think the 2%-3% merit budget range will be with us for awhile. It has redefined how organizations think about what a merit budget is and how it is administered.
The idea that the "top performers eat first" used to mean that they got the biggest raises. In the new merit midget environment, top performers get the only raises — or something very close to this standard. That sets the bar very high for managing expectations — actually re-setting expectations. But there is little choice in this deflationary labor environment but to use merit dollars as an exceptional tool to use in rewarding exceptional performers. The rest of the workforce will have to learn to value benefits, work environment, job fulfillment, a good supervisor, learning and development and all the rest of what we refer to as total rewards. Organizations, and employees, will have to re-think the value proposition of employment and adapt to this new normal. As you mention Kerry, just having a job is a big plank in a very different employee value proposition!
July 21, 2010 — Well the high level results for yet another 
As tired as I am (perhaps you too?) of the phrase "new normal" that is used to characterize everything post-Great Recession, I think the 2%-3% merit budget range will be with us for awhile. It has redefined how organizations think about what a merit budget is and how it is administered.
Print this Page