Human Capital & Careers

Employer Compensation Costs Flatten Out

Although benefit costs make up a sizable piece of the overall private-industry compensation pie, it was a diminished slice for the quarter.
Stephen TaubAugust 2, 2005

For the year ended June 2005, increases in total compensation costs for private-industry workers slowed compared with year-over-year increases for the period that ended June 2004, according to the U.S. Department of Labor’s Bureau of Labor Statistics. Such costs rose by 3.2 percent, compared with 4 percent for the 12 months ended June 2004.

Quarterly pay-figure increases are also flattening. Compensation costs for the private sector rose 0.6 percent between March and June 2005, the same as the gain in the previous quarter. The trend applied to benefit costs absorbed by private companies, which rose 0.8 percent for the quarter ending in June, following a 1.1 percent gain in the previous quarter.

While benefit costs make up a sizable chunk of the overall private-industry compensation pie, it was a diminished slice for the quarter. While private-sector benefit costs contributed nearly 35 percent of the compensation gains during the quarter, they produced nearly 60 percent of such increases from December 2004 to March 2005.

Indeed, the overall moderation in pay growth could last for a while. According to a separate survey by WorldatWork, a not-for-profit professional association, representatives of participating companies expect average total salary budget increases of 3.7 percent for 2005. That forecast is in line with last year’s projections for the same period.

For 2006, the survey participants predicted salary budget increases of 3.8 percent, according to the survey of 2,483 participants from large U.S. companies. The companies represent 13.9 million workers.

Still, pay raises are becoming more widespread. Participants in the WorldatWork survey indicated that 92 percent of employees will receive an increase in base pay this year, up from 87 percent in 2004. While base pay increases measured by the study may come from general, merit, or cost of living increases, they can’t derive from promotional increases.

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