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Salary Review Expectations

I have just started the planning stage on a forecast for next calendar year. The Company has approximately 40 employees and is based in California. In discussing the guidance to be distributed to departmental managers I was surprised by the range of increases the company was considering for salaries next year. Apart from the question as to whether the Company can afford it or not before we complete the revenue and gross contribution, I expected the background of high level unemployment, uncertain economic prospects, pressure on selling prices, need to build a cash reserve etc to limit expectations to say, no more than 2.5% overall, year on year.  Am I being un duly pessimistic?  It would be helpful to hear what other companies are considering for salary increases next year ( white collar, hi tech industry!)

Answers

Leslie D'Alessandro
Title: Shareholder
Company: Wiltshire Whitley Richardson & English, ..
(Shareholder, Wiltshire Whitley Richardson & English, PA) |

I'm in Fort Myers, FL, an area still severly affected by the downturn in the economy. I was very surprised to read of the forecasted salary increases for accounting personnel in recent emails from Robert Half, Int'l.

Jill Nickerson
Title: CFO
Company: In Transition
(CFO, In Transition) |

I'm with a small (50 employees) high tech manufacturing company in Portland, OR. We have a compensation study done every three years, with market adjustments recommended by the consultant for the years in between. Our consultant has advised to use a market range movement of only 1.5% for 2012. I challenged whether specific disciplines might be increasing at a faster rate, such as engineering. They reviewed the market and determined that engineering has increased at an even slower rate.

Our company is very concerned about being competitive within our market and we compete with large companies like Intel and Nike for talent. That is why I feel it crucial to have an outside company provide information every year. In November, we let staff know the overall compensation range movement for the following year to prepare them for the review cycle. Using an outside firm establishes credibility for our employees. I find the cost of the report to be nominal, averaging around $5k per year.

Of course, there are reasons specific employees may need to receive higher than normal increases (high performance, promotions). I try to anticipate those cases and come up with an overall company increase rate, that is slightly higher than the recommended rate, to be approved by the executive management. I then provide each department with an overall salary adjustment amount to use for their employees. That gives managers discretion, but keeps costs in line. It also gives me the basis for the 2012 salary budget.

Jill Nickerson
Title: CFO
Company: In Transition
(CFO, In Transition) |

There is conceptual difference between the percentage increases shown in salary
surveys and the market trend rate for compensation. Trending studies take into effect how the entire market has moved. This captures information about salary reductions, wage freezes, new employees hired at a lower rates, etc.

Topic Expert
Malak Kazan
Title: VP, Special Projects
Company: ERI Economic Research Institute
(VP, Special Projects, ERI Economic Research Institute) |

I would suggest getting a salary increase budget survey. You can get one at low cost from ERI by submitting your company's data into the survey. Note, this is survey is includes forecast not just historic actual spend. The web site link is https://salary-surveys.erieri.com/index.cfm?FuseAction=MeritIncreaseSurvey.PurchaseReport&PurchaseParticipate=Yes

Ivy Guice
Title: Director, Business Affairs
Company: Houston Advanced Research Center
(Director, Business Affairs, Houston Advanced Research Center) |

I'm with a small (40 person strong)nonprofit in Texas. Having reviewed various salary surveys within the nonprofit and research sectors and how lean research funding is for the upcoming year we determined that 2.5% was the safest we could factor in for our employees.

Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

Most competitive estimates I have seen range from about 2.5% to 4% on the average. Company size, industry, profitability, and other factors need to be considered.

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