Pay
freezes in the US are slowly defrosting as US employers become more optimistic
about an economic recovery.
The
new 2002/2003 US Compensation Planning Survey, from Mercer Human
Resource Consulting, shows one in six employers froze salaries for some or all
employees in 2002, but just one in 17 plans no pay increases for some or all
employees in 2003.
According
to Mercer’s survey, overall pay increase budgets fell below 4 per cent for both
years – 3.8 per cent in 2002 and 3.9 per cent in 2003 – down from 4.4 per cent
in 2001 and 4.2 per cent in 2000.
When
companies with salary freezes are factored into these numbers, the average
increases are 3.4 per cent in 2002 and 3.8 per cent in 2003.
The
survey analysed data from more than 1,600 organisations, employing a total of
15.5 million workers.
Steven
E Gross, who leads Mercer’s compensation consulting in the US, said:
"During the second quarter, US employers appeared to be expressing some
optimism about an economic recovery. However, as the economy has remained
sluggish and the equity markets have struggled over the summer, employers are
reluctant to commit to higher pay increase budgets."
He
said companies are now looking at what they can afford to pay, not just what
they have to pay.
"That’s
why we’re seeing pay variations by industry. Industries that are doing well are
paying differently to struggling industries," he said.
Mercer’s
survey shows 2002 pay freezes hit some industries harder than others. Salary
freezes/deferrals were most common in the computer software/services and
telecommunications industries, while fairly rare in more recession-proof
industries such as utilities, healthcare and insurance.
In an
effort to cut costs, many survey respondents had also enacted workforce
reductions, extended the time between pay increases from 12 months to 18 months
or longer, reduced work schedules, and initiated voluntary leaves of absence.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
