Anticipating Improved Business Performance, Employers Hold the Line on Salary and Variable Pay Increases
LINCOLNSHIRE, Ill., Dec. 14, 2010 /PRNewswire/ — A new survey from Aon Hewitt, the global human resource consulting and outsourcing business of Aon Corporation (NYSE: AON), reveals that compensation budgets are likely to remain intact for 2011. Additionally, few companies anticipate having to take drastic actions such as pay freezes to reduce costs.
Aon Hewitt’s survey of more than 500 employers found that three-quarters of companies expect to reach or exceed business performance goals this year, leading to the stabilization of pay and variable pay budgets in 2011. Most companies (56 percent) made no revisions to their original base salary increase budgets, which are anticipated to be at their highest levels in two years. In 2011, salary increases for salaried exempt workers (those workers for whom overtime rules do not apply) are expected to be 2.8 percent. This is up from 2.4 percent in 2010, and significantly higher than the record-low pay raises workers saw in 2009 (1.8 percent).
“Prior to the recession, companies were optimistic about their compensation budgets but ultimately scaled back from their original projections in an effort to control costs,” explained Ken Abosch, marketing strategy and development leader in Aon Hewitt’s Broad-Based Compensation Consulting practice. “As business performance increases, organizations are more comfortable with stabilizing salary budgets. That said, we will not see base pay raises return to pre-recession levels, as these sub-3 percent increases represent the new ‘normal’ in base-pay spending.”
Spending on variable pay—performance-based awards that must be re-earned each year—is also holding steady. Updated findings show 2011 spending on variable pay as a percentage of payroll will be 11.6 percent for salaried exempt workers, down just slightly from original projections of 11.8 percent.
“We’ll continue to see employers move toward compensation models that reward employees for strong business and individual performance,” said Abosch. “Despite economic instability, employers spent more on variable pay in the past three years than they ever have before. Workers should be encouraged that there are still compensation dollars out there, but they will be expected to show strong results to earn them.”
In addition, Aon Hewitt’s survey shows that none of these organizations anticipate cutting pay in 2011, and just 11 percent plan to freeze salaries for salaried exempt and non-exempt workers next year, which is similar to 2010, when 12 percent of organizations froze salaries.
About Aon Hewitt
Aon Hewitt is the global leader in human resource consulting and outsourcing solutions. The company partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance. Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies. With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees. For more information on Aon Hewitt, please visit www.aonhewitt.com.
Aon Corporation (NYSE:AON) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing. Through its more than 59,000 colleagues worldwide, Aon unites to deliver distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon’s industry-leading global resources and technical expertise are delivered locally in over 120 countries. Named the world’s best broker by Euromoney magazine’s 2008, 2009 and 2010 Insurance Survey, Aon also ranked highest on Business Insurance’s listing of the world’s insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on revenues in 2007, 2008 and 2009, and Aon was voted best insurance intermediary 2007-2010, best reinsurance intermediary 2006-2010, best captives manager 2009-2010, and best employee benefits consulting firm 2007-2009 by the readers of Business Insurance. Visit http://www.aon.com for more information on Aon and http://www.aon.com/unitedin2010 to learn about Aon’s global partnership and shirt sponsorship with Manchester United.
SOURCE Aon Corporation