US may temper pay rises

Employers in the US are planning annual pay increases of more than 4 per
cent in 2001 and 2002, according to research by William M Mercer.

But the report, the 2001/2002 US Compensation Planning Survey, suggests some
employers will rethink the size of their pay increases if the third and fourth
quarters of 2001 do not live up to expectations.

Computer software and services sectors are set for the biggest salary
increase in the next year at 5.6 per cent. Salaries in the consulting, legal
and accounting sectors are set to rise significantly by 5.1 per cent.

Agricultural staff are to receive the lowest average annual pay increase –
3.7 per cent – followed by chemicals, mining, paper and allied product
manufacturing, all on 3.9 per cent.

The use of competency-based pay has increased by 7 per cent in the past
year. Now, nearly one fifth of employers are using the method, and a further 17
per cent are considering doing so.

More than a third of the employers surveyed are offering incentives to
non-management staff to reinforce a pay-for-performance culture. A further 21
per cent of employers are considering this.

Steven Gross, leader of employee compensation consulting at William M
Mercer, said that to reduce fixed costs US employers should be paying one-off
lump sum awards to high-performing staff rather than annual salary increases.

He said, "In difficult economic times, employers want to invest their
reward dollars where they can most strongly influence employee behaviours and
business results.

"These are tough choices but in recent years companies have made
investments to recruit and develop talent. They must maintain these critical
skills and high performers, unfortunately at the expense of other

More than 1,500 US companies were polled, employing more than 14 million

By Paul Nelson

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