January 2011 Newsletter - continued

Pay Increases Coming?

Modest Compensation Increases Expected in 2011

As managers become increasingly concerned about retaining top talent, most organizations are reporting plans to raise salaries modestly in 2011, while continuing to allocate the largest bonuses and base pay increases to key employees and strong performers. 

Based on recent compensation trends surveys, 98% of the companies surveyed intend to grant base pay increases in 2011.  Of these organizations, the increase is expected to average 2.9%, up slightly from the actual pay increase of 2.7% reported in 2010 and down from the 2009 average of 3.2%.  Also, only 2% are anticipating across the board salary freezes next year, compared to 13% in 2010 and 31% in 2009. 

Research has shown that although salary increases for 2011 are expected to be even across most employee groups, companies are reserving the biggest raises for their high-performing talent.  The highest performing employees are estimated to comprise 14% of the workforce and received an average increase of 4.3% in 2010.  Average performers on the other hand (35% of the typical workforce) received an average increase of 2.6% and the weakest performers (7% of the workforce) received an increase of only 0.5%.

It appears that rewards (not just pay increases) for high performers are back as managers assess the risk of losing key contributors.   As the economy begins to recover and certain labor markets improve competition for the best and brightest will heat up.  For additional compensation insights and industry trends we invite you to call the HR Performance Group, Inc.  We can help you enhance your strategies to retain and develop your employees in 2011.