2007 Hewitt Salary Survey - 3.7% salary increases, and more in bonuses

Hewitt's survey of 1,028 large organizations representing almost 500 million employees reveals that salaried exempt employees can expect base salary increases of 3.7% next year, the highest increase in five years but only a modest increase from this year's 3.6%.  Executive employees are projected to receive 2007 increases of 3.8%, compared with 3.6% for salaried non-exempt and non-union hourly, and 3.3% for union employees.

More companies are relying on variable pay – performance-related awards that must be re-earned each year – to attract, motivate and retain employees.  Skyrocketing energy costs, rising medical costs and interest rate-related expenses continue to have the potential to offset salary gains for workers, but many could make it up with variable pay bonuses, according to Hewitt Associates, a global human resources services company.

Other key survey findings:

  • Companies reported a 15.7 percent average turnover rate in the past 12 months.
  • Attraction and retention continue to be a sore spot for a number of companies with 37 percent reporting problems.
  • Less than 2 percent reported a salary freeze for 2006, and less than 1 percent expect a salary freeze in 2007.
Hewitt's survey shows that employers are relying more on bonuses as a primary means of attracting, motivating and retaining key talent.

In 2006, actual company spending on variable pay as a percentage of payroll is 11.2 percent, more than three times the 2006 average base pay increase.  Spending on variable pay in 2007 is projected to remain strong at 11.0 percent.  Variable pay has grown in prevalence since the early 1990s, with 80 percent of responding companies currently offering at least one type of broad-based variable pay plan, compared with 51 percent in 1991.  According to Hewitt's study, special recognition awards are the most common awards (63 percent), followed by business incentives (62 percent), signing bonuses (62 percent), individual performance awards (44 percent), non-executive equity awards (44 percent) and retention bonuses (35 percent).

The industries experiencing above-average salary increases include energy (4.5 percent), construction/engineering (4.1 percent) and aerospace (4.0 percent).  The lowest industry average salary increases are projected to be computers and related products (3.2 percent), metals (3.2 percent), forest and paper products/packaging (3.3 percent), rubber/plastics/glass (3.3 percent), education (3.3 percent) and entertainment/communications/publications (3.4 percent).

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