Human Capital & Careers

Spring Thaw

More firms are planning to restore pay increases this year, at least in small amounts.
Alix StuartMay 1, 2010

After one of the toughest years on record, employees may finally receive some welcome relief. Culpepper and Associates, a compensation-research firm, reports that of the companies that froze salaries last year, 70% have either already unfrozen them or plan to this year, according to a survey of 765 companies. That’s up markedly from 51% in September, although the average size of the projected increases has decreased slightly over that time, from 2.9% to 2.8%.

The decline in average increases is expected, says CEO W. Leigh Culpepper, since “very often companies report bullish salary budget projections…and later scale [those] back.”

Only 14% of companies are planning to freeze salaries in 2010, compared with 37% last year; 27% are still unsure.

Many firms in the tech space announced their intentions to reinstate merit increases during year-end conference calls. Chipmaker Broadcom, Novellus Systems, and VMWare were among those announcing such changes. Companies in more-traditional sectors were also following suit, including TRW Automotive and Tenet Healthcare.

“We gave increases at a normal rate,” after reducing 3% of the workforce and then freezing salaries last year, says Broadcom CFO Eric Brandt. Keeping them as-is “is not sustainable.” (Of course, it helps that Broadcom had a record fourth quarter, in terms of revenue and cash flow.)

The survey was global, and reflected some large differences between developing and developed countries. Overall, according to Culpepper, base salary increases in the United States are projected to increase by 2.47% in 2010, the smallest increase of all regions surveyed. Europe fares only slightly better, at 2.83%, while Africa and South America average 6.5%.

Data from Buck Consultants shows similar trends, projecting that about 75% of companies that froze pay will unfreeze it by July. “The pressure [on employers] is going to increase, but until unemployment numbers start to steadily decline, it will be gradual,” says Thomas Burke, director of compensation consulting for Buck.

avg. base salary increases; % of companies freezing salaries across jobs and locations