salary increases 2011NEW YORK—U.S. salary increase budgets remain historically low, but projections for 2011 show a modest increase, according to The Conference Board annual salary increase budgets survey report, released on July 13. For the second straight year, the median salary increase budget in 2010 is 2.5 percent. Projections for 2011 show a modest increase to three percent.

Salary increase budgets refer to the pool of money that an organization dedicates to salary increases for the coming year. It is represented as a percentage of current payroll and calculated using a pre-determined total percentage of base pay (excluding overtime, bonuses, etc.).

Low Inflation Risk

“This less-than-robust increase is an indication that the economic recovery has not yet picked up enough strength to significantly raise salary budgets to a level consistent with a healthy economy,” said Christopher Woock, human capital researcher at The Conference Board, a business membership and research association. “But the news is not all grim," he added. "There appears to be little risk of inflation eroding the real value of the increase.”

Across all industries, the 2011 forecast for salary increase budgets showed little variation, with no employee group in any industry projected to exceed the overall median of three percent.

The projections for 2011 salary increase budgets are up from the actual 2010 increases, according to the report. The largest year-over-year projected increases are in the diversified services industry—where the projected 2011 median salary increase budget is 0.5 to three percentage points higher than the actual 2010 budget—and in the diversified financial services industry—where the projected 2011 median salary increase budget is 0.5 or 0.63 percentage point higher than the actual 2010 budget.

More Pay for Performance

Pay for performance continues to be the common approach for the allocation of salary increase budgets as companies remain focused on high-performing employees and growth businesses. While most companies have not budgeted general increases, overall merit increase percentages for 2010 actual and 2011 projected budgets mirror the trend of those of total increases.

—Hedley Lawson, Contributing Editor

The information for the report was gathered from 313 U.S. companies surveyed from April 7 to 30, 2010.
Source: Society for Human Resource Management