E-mail this page				Print this page

Contact: Mercer Feedback

United States
New York , 14 August 2008

In light of rising gas and food prices, and a bleak economic outlook, salary increases will remain flat for most employees this year. According to the 2008/2009 US Compensation Planning Survey from Mercer, US employers plan to award average pay increases of 3.7 percent in 2009, compared to 3.8 percent in 2008. Raises are higher, however, for top-performing employees and high-performing industries regardless of the current economic environment.

The current edition of Mercer’s survey, which has been conducted annually for more than two decades, includes responses from more than 1,000 employers across the US and reflects pay practices for more than 12 million workers. The survey results are captured for five categories of employees: executive, management, professional (sales and non-sales), office/clerical/technician and trades/production/service. (See Table 1)

“Clearly the uncertainty of the economy is having an impact on compensation budget planning,” said Steve Gross, global leader of Mercer’s broad-based performance and rewards consulting business. “In this less-than-robust economic environment, however, top-performing employees are an organization’s best competitive weapon and they are rewarding them accordingly.”

Differentiation by performance

As pay increase budgets remain constant, organizations are broadening performance differentials by granting notably greater salary increases to their top-performers. According to Mercer’s survey, the highest-performing employees (14 percent of the workforce) are expected to receive base pay increases of 5.6 percent in 2009 compared to 3.3 percent for average performers (36 percent of the workforce) and 0.6 percent for the weakest performers (7 percent of the workforce). (See Table 2)

“The gap between top performers and low performers is spreading as companies struggle to sustain compensation levels throughout the organization,” said Mr. Gross. “Distinguishing pay increases based on performance allows employers to attract and retain those employees that will contribute to the company’s competitiveness and success.”

Consistent with base pay increases, Mercer’s survey shows companies widening performance differentials for short-term incentive payouts, as well. The highest-performing management level employees are expected to receive average short-term incentive payouts of 36 percent compared to just 8 percent for the lowest performers. Similarly, incentive payouts for high-performing office/clerical/technical positions at 13 percent are more than four times that of the low performers in the

same group (3 percent). (See Table 3)

On the whole, average payouts as a percentage of base pay for all employee groups are high. According to Mr. Gross, short-term incentive awards are expected to decline given this year’s lackluster performance in certain industry sectors.

Differentiation by industry

Increases to base salaries differ among all industry sectors. Compared to the expected average pay increase of 3.7 percent in 2009, US employers within high-performing industries plan to grant salary increases that are up to one-quarter higher. The oil and gas and the business process outsourcing industries are among the highest with projected pay increases of 5.0 percent and 4.7 percent for 2009, respectively. While high relative to other industries, the projected 2009 pay increases for these two sectors are either the same or slightly less compared to 2008 levels.

“The tight economy has made the marketplace extremely competitive,” said Mr. Gross. “Despite budgetary constraints in other sectors, growth industries are likely to boost salaries to attract and retain talent required to continue their performance levels.”

In contrast, other industries expect to award less than average pay increases in 2009. Retail is among these sectors with a projected increase of 3.4 percent along with wholesale distribution, durable goods and education projected at 3.5 percent. (See Table 4)

For more information or to purchase the full report of Mercer’s 2008/2009 US Compensation Planning Survey, visit www.imercer.com/cps or call 800 333 3070.

About Mercer

Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit www.mercer.com.

# # #

Table 1: 2008/2009 budgeted pay increases

Source: Mercer, 2008/2009 US Compensation Planning Survey

Table 2: 2009 base pay increases as a function of performance

Source: Mercer, 2008/2009 US Compensation Planning Survey

Table 3: Short-term incentive payouts based on 2007 performance (typically paid in 2008)

Source: Mercer, 2008/2009 US Compensation Planning Survey

Table 4: 2008/2009 budgeted pay increases by select industry

Source: Mercer, 2008/2009 US Compensation Planning Survey

E-mail this page

Print this page

Contact: Mercer Feedback