Article by John Rossheim
If you don't lose your job, you'll probably receive an adequate pay raise this year. That's the cold comfort provided by compensation experts and human resources managers as they look ahead.
Last year, salary hikes continued apace, at least through September. Total compensation rose by 3 percent in the first three quarters of 2001, compared to 3.2 percent for the same period in 2000, according to the US Bureau of Labor Statistics.
For 2002, "employers have reported that they expect to increase salaries, but at a lower rate," says Bill Coleman, senior vice president of information provider Salary.com in Wellesley, Massachusetts. The consensus of surveys and observers is that the average employer will boost pay by about 3 percent for the average worker, about one percentage point lower than through much of the 1990s.
But those averages put a deceiving slant on salary changes, according to David Thomsen, founder of research firm Economic Research Institute (ERI) in Redmond, Washington. In the research firm's 2002 salary planning survey, the planned increases reported by 1,652 organizations were weighted by the number of employees in each organization. This weighting, which emphasizes the perspective of individual workers, yields projected pay increases of close to 4 percent for this year.
What explains the difference in projections? "Smaller firms are making changes [to reduce pay increases], while larger firms are standing pat," says Thomsen. In ERI's survey, the larger firms count more, because they have more wage earners.
Many large corporations are trying to maintain their budgets for salary increases as they lay off workers, because "companies can't afford to lose people, even in a soft labor market," says Coleman. It is just too expensive to replace good employees.
What's the trend for cash compensation at companies in particularly hard-hit industries? "There absolutely are companies that are freezing or cutting salaries" in businesses such as consulting, manufacturing, airlines and technology, says Coleman. Agilent Technologies, American Airlines, Charles Schwab, IBM and White Electronic Designs are among the many employers who reduced pay for some or all of their workers last year.
Geography is also expected to be a factor in 2002 pay changes, according to Thomsen. "We saw the Northeast most affected" by reductions in planned increases, he says. "The closer you get to Manhattan Island, the greater the impact."
Recent college graduates and entry-level workers will also likely feel it in their pockets. "Entry-level salaries are going to come back to Earth," says Coleman. With demand for new graduates way down -- the National Association of Colleges and Employers projects 20 percent fewer openings for grads this spring -- pay is sure to suffer. "MBAs are the ones whose salaries are really going to be hit," adds Thomsen.
Beyond simple adjustments in salary or wages, what compensation changes are in store for American employees in 2002 and beyond? "We're moving into an era of differentiated pay," says Solange Charas, principal of Charas Consulting Inc. of New York City. There will be "less peanut butter" -- pay increases spread thin over all employees -- and greater rewards for star performers, says Charas. "Bonus plans are going to move further down the organization and become a more significant part of pay for most employees."
In the face of all this complexity, what can a typical employee do to maximize any potential pay increase? "You have to make yourself visible," says Frances Bolles Haynes, coauthor of 101 Salary Secrets. "People can't expect that their bosses know what they do 24/7," so they need to present their accomplishments to their managers, Haynes says. Ultimately, "if you're a better worker, you're going to get more money."