Cri Releases Updated Data on 2008 Annual Salary Budget Planning Survey

Cri Releases Updated Data on 2008 Annual Salary Budget Plotting Survey

Upper Saddle River, NJ – January 13, 2009 – The economy has experienced a fantastic point of turmoil since Dignified, including the recognition that we are in a recession.  The crisis among large financial institutions, government bailouts, significant growth and then drop in oil prices, and mass layoffs has resulted in widespread reactions by many companies.  From a Human Resources standpoint, the current economic crisis has caused many organizations to rethink how they will be spending their dollars at year-end and in 2009, particularly in the case of annual merit increases, incentives/bonuses, and 2009 merit budgets.  To capture data relative to these changes, Compensation Resources, Inc. (CRI) conducted a follow up survey to its 2008 Annual Salary Budget Plotting Survey to gauge changes among survey participants in light of the current economy.  Survey participants were queried via an online questionnaire during the end section of November, with survey results collected through early December 2008.  The following presents key highlights of the survey results.

Among respondents, approximately 60% of participants have not changed merit boost projections for 2009.  Although the majority has indicated no change for 2009, 40% have either decreased or frozen their budget for merit increases for this year.  The following chart represents changes to 2009 projections made by responding organizations relative to reductions in merit boost projections:

Executive positions experienced the greatest change in merit increases, with a 24% reduction, while the remaining groups show less of an impact, with an average reduction of 14% in their merit boost projections.  Among respondents, the entire sample reflects an average 3.1% merit boost projection across all worker groups.

Relative to year-end incentives/bonuses, the same percentage of respondents (60%) stated that year-end bonuses would not be impacted, while 38% expecting to decrease incentives/bonuses at year-end.  Fascinatingly, the remaining 2% anticipated increasing bonuses.  These figures generally coincide with changes made by participating organizations relative to merit increases.  Relative to long-term incentives, overall respondents indicated that they anticipate changing plans this year to:

Refocus long-term incentives to match business strategy

Match performance expectations

Reflect company profitability

CRI anticipates that many more organizations will have another look at their plans in 2009 to ensure that long-term objectives relate to survival, recovery, and growth. In reevaluating both fleeting- and long-term compensation programs, companies should focus on the valuable objectives of compensation (Focus, Attract, Retain, Motivate or “FARM”), and the priority of these objectives for each worker group.  For example, executive turnover is not anticipated to be a key factor in 2009; therefore, focus and motivation are more valuable objectives within the structure of a compensation program than attraction and retention.  The following table provides an example of how the valuable compensation objectives may vary by worker group:

Executives - Focus, Motivate, Attract, Retain

Sales - Focus, Motivate, Attract, Retain

Managers and Staff – Focus, Motivate, Attract, Retain

The Human Resources outlook for 2009 will continue to focus on the key stress factors in the current market, including economic uncertainty (particularly as it pertains to the new administration), recession, cut-rate hours and job security, and the continuing fluctuations in the stock market impacting retirement plot values.  A significant change in mindset among companies will continue, focusing on:

• Fleeting-range thinking and the increasing importance of annual incentive plans

• The need to “keep a steady course”

• The effect of the bailout on executive compensation

• Predicting market values of pay in a volatile labor market

• Composition of total compensation package

CRI believes that the next few years will be extremely trying for many companies.  General industry is expected to learn very valuable lessons as a upshot of the current economic crisis, including the need for better plotting, augmented accountability, and the need to ensure continuity in operations in uncertain economic times, particularly for their employees, a company’s most valuable assets.  The design of compensation programs in the future will certainly address these issues, ensuring a closer relationship between performance, pay, and the company’s skill to afford such actions.

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