Pay Raises Are Smaller Than Expected This Year

Workers who got less of a raise than they anticipated this year aren't alone. A new survey finds the nation's slack economic recovery has prompted many employers to rein in expenses, thereby reducing planned raises and bonuses.

A poll of more than 1,450 large companies by Hewitt Associates (HEW) shows that base pay for salaried exempt workers rose an average 2.4% this year, less than the 2.7% increase projected in August 2009. Still, that's higher than the meager 1.8% rise workers received last year.

"Going into 2010, employers were optimistic that they would be able to allocate more money toward compensation, but the lagging economy and lower-than-expected company performance forced many employers to revise their spending," Hewitt's Ken Abosch said in a statement.

Hewitt's survey shows that while companies are spending less on pay raises and variable pay awards in 2010 this year than anticipated, they are more optimistic about the future. Most companies said they expect to bump up salary increases and bonuses next year.

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Salaried workers -- regardless of their eligibility for overtime pay -- and executives can expect increases on average of 2.9% in 2011, Hewitt said, while nonunion hourly and union employees can anticipate raises of 2.8%.

Still, those projections could change if things don't improve, Abosch said. "Right now, employers believe they'll be able to raise salaries next year, but if the economy remains unstable, they'll be forced to readjust base-pay increases to offset other spending or revenue shortfalls."

Though salary increases this year were lower than expected, the news wasn't all bad, Hewitt said. The number of companies freezing salaries this year fell significantly, and the trend is expected to continue into next year. In 2010, 21% of employers froze salaries, compared to nearly half (48%) in 2009. Just 10% of employers anticipate salary freezes in 2011.