January 8, 2003—Hewitt, a human resources outsourcing and consulting firm, surveyed 1,045 companies in their 26th Annual “U.S. Salary Increase Survey,” and found that average salary increases for 2003 are projected to be 3.9 percent for salaried exempt employees, 3.8 percent for salaried nonexempt employees, 3.8 percent for nonunion hourly workers and 4.1 percent for executives. This is a slight increase from 2002, which saw an average salary increase of 3.6 percent for salaried exempt employees, 3.5 percent for salaried nonexempt employees, 3.5 percent for nonunion hourly workers and 3.8 percent for executives.
While increases are projected to be slightly higher next year, they are down from 2001, when base salary increases were 4.3 percent for salaried exempt employees, 4.2 percent for salaried nonexempt employees, 4.0 percent for nonunion hourly workers and 4.5 percent for executives. Meanwhile, 10 percent of organizations in this Hewitt study reported a salary freeze in 2002, while only 1 percent expect to take this type of action in 2003.
Additionally, the Hewitt study shows that workers in many major cities nationwide should experience salary increases slightly higher than the national average projections for 2003. For instance, pay increases for salaried exempt employees in Atlanta (4.0 percent), Boston (4.0 percent), Houston (4.6 percent), Milwaukee (4.4 percent), San Francisco (4.0 percent) and Washington D.C., (4.2 percent) are expected to beat the estimated national average for next year. Conversely, in cities such as Chicago (3.9 percent), Dallas (3.8 percent), New York (3.8 percent) and Philadelphia (3.5 percent), salaried exempt employees should see salary increases at or just below the 2003 projected national average of 3.9 percent.
Moderate salary increase projections are offset by companies’ intended use of variable compensation plans. (Variable compensation is a performance-related award that must be re-earned each year and does not permanently increase base salary.) According to Hewitt, 80 percent of surveyed organizations currently have at least one type of variable pay plan in place, which is consistent with 2001 when 81 percent of organizations offered variable pay, and up from 1995 when just 59 percent of companies had this type of program. Furthermore, company spending on variable pay for salaried exempt employees averaged 10.5 percent of payroll in 2002 and is projected to average 10.9 percent of payroll in 2003 (see chart).
Copies of the Hewitt Associates 26th Annual “U.S. Salary Increase Survey” and “Timely Topic Study on 2002 Variable Pay” are available online or by calling the Hewitt Associates Publications Desk at 847/295-5000.
