Over the past few weeks I’ve been culling information from various compensation surveys, HR Magazine, and presentations by Mercer Consulting and ORC Worldwide to investigate compensation benchmarks for 2009 and trends for 2010. Here’s what I have learned and what I believe to be the implications for job seekers.
2009/2010: Compensation Data: What’s Up?
According to research conducted by ORC Worldwide, hiring is up in certain sectors (manufacturing and service), but there are multiple indicators that companies are continuing to be cautious. Top talent recruiting remains a buyer’s market and new hire compensation is still on the decline. In 2009, 29% of companies surveyed implemented salary freezes, 30% had mandatory layoffs, and 29% reported hiring freezes. According to the 2008-2009 SIRS® U.S. Budgets & Structures Surveys, the average salary increase dipped from 3.8 to 2.7 between 2008 and 2009 and 2010 projections are at 3%. Salary increases outside of the U.S. are following a similar pattern. ORC data suggests that in this tough economy, companies need to “do incentives right” to manage program objectives and employee engagement.
Implications for Job Seekers
We know it’s a tight labor market but sometimes knowing the statistics can help give you the push you need to create a more proactive search campaign. A quick look at these statistics reveals that there are less open jobs to compete for and the importance of defining your unique value proposition and leveraging your network is critical. In addition, given the fact that many companies are experiencing salary freezes, you need to be more strategic in the way you negotiate your compensation package and explore non-monetary or low cost perks over base salary. You will be better prepared to negotiate fair and reasonable packages if you know some of the obstacles on the way in.
Looking to the Future: Compensation Strategies for 2010 and Beyond
According to Mercer’s U.S. Compensation Planning Surveys 2008/09 there is an increasing emphasis on performance differentiation. The performance rating system appears to be applied more cautiously now to make sure there is enough compensation allocated to reward top performers. Fewer employees are falling in the middle of the performance grading scale and more are falling below the midpoint of the salary increase range. Moving forward, the consulting firm suggests keeping employees engaged and being as transparent as possible when communicating company information to keep employees motivated and productive. While salary budgets are tight, employers can benefit from creating career development opportunities to keep employees interested in their work, implementing alternative work arrangements to cut costs, and proactively assessing pay equity in light of the 2009 Ledbetter Act and emerging Paycheck Fairness Act.
Implications for Job Seekers
In some ways this research is good news for job seekers because it shows that more companies are embracing a pay for performance culture and reserving the highest merit increases for the best performers while more carefully scrutinizing the work of average or below average performers. Job seekers have an opportunity to prove their value to a company in a business environment that is already hyper-sensitive to the costs associated with poor performers. Job seekers may find that in this economy, employers are more open to negotiate flex-time, telecommuting, job sharing and other non-traditional work arrangements in their continuous efforts to cut costs. And job seekers may be surprised to find increasing levels of employee engagement through inexpensive but intrinsically valuable rewards programs and career development options.
Recovery on the Horizon?
According to HR Magazine, a Watson Wyatt Worldwide survey of 179 companies reveals that as of last June, the number of respondents who reported that the worst had passed was nearly double the percentage that reported the same sentiments two months earlier. Results from the study show that for 2010, 62% of companies surveyed plan to cancel hiring freezes, 55% who had reduced salaries plan to role them back to previous levels, and 70% expected to start matching employees’ 401 (k) and 403 (b) contributions at pre-recession levels (with more than one-third noting they were unsure when this would occur). However many employers expect to see long-term changes in retirement decisions, staff sizes, and health cost-sharing, which will affect compensation strategies.
Implications for Job Seekers
The fourth quarter of 2009 and first quarter of 2010 may reflect an increase in hiring and an improvement in salary offers and certain employee perks. Employers may be more willing to hire and reward high performers because it costs less to maintain good talent with retention strategies than it does to attract new talent.
While these observations and statistics don’t necessarily represent every company and every industry, they do offer a glimpse into some marketplace trends and present job seekers with an opportunity to be more informed as they navigate their job search.