CRI Releases Updated Data on 2008 Annual Salary Budget Planning Survey

Upper Saddle River, NJ - January 13, 2009 - The economy has experienced a great degree of turmoil since August, including the recognition that we are in a recession.  The crisis among large financial institutions, government bailouts, significant escalation and then drop in oil prices, and mass layoffs has resulted in widespread reactions by many companies.  From a Human Resources standpoint, the current economic crisis has caused many organizations to rethink how they will be spending their dollars at year-end and in 2009, particularly in the case of annual merit increases, incentives/bonuses, and 2009 merit budgets.  To capture data relative to these changes, Compensation Resources, Inc. (CRI) conducted a follow up survey to its 2008 Annual Salary Budget Planning Survey to gauge changes among survey participants in light of the current economy.  Survey participants were queried via an online questionnaire during the latter part of November, with survey results collected through early December 2008.  The following presents key highlights of the survey results.

Among respondents, approximately 60% of participants have not changed merit increase projections for 2009.  Although the majority has indicated no change for 2009, 40% have either decreased or frozen their budget for merit increases for this year. 

Executive positions experienced the greatest change in merit increases, with a 24% reduction, while the remaining groups show less of an impact, with an average reduction of 14% in their merit increase projections.  Among respondents, the entire sample reflects an average 3.1% merit increase projection across all employee groups.

Relative to year-end incentives/bonuses, the same percentage of respondents (60%) stated that year-end bonuses would not be impacted, while 38% expecting to decrease incentives/bonuses at year-end.  Interestingly, the remaining 2% anticipated increasing bonuses.  These figures generally coincide with changes made by participating organizations relative to merit increases.  Relative to long-term incentives, overall respondents indicated that they anticipate changing plans this year to:

• Refocus long-term incentives to match business strategy
  
• Match performance expectations
  
• Reflect company profitability
  

CRI anticipates that many more organizations will reevaluate their plans in 2009 to ensure that long-term objectives relate to survival, recovery, and growth. In reevaluating both short- and long-term compensation programs, companies should focus on the basic objectives of compensation (Focus, Attract, Retain, Motivate or "FARM"), and the priority of these objectives for each employee group.  For example, executive turnover is not anticipated to be a key factor in 2009; therefore, focus and motivation are more important objectives within the structure of a compensation program than attraction and retention.  The following table provides an example of how the basic compensation objectives may vary by employee group:

Executives	Sales	Managers and Staff
Focus Motivate Attract Retain	Focus Motivate Retain Attract	Retain Focus Motivate Attract

The Human Resources outlook for 2009 will continue to focus on the key stress factors in the current marketplace, including economic uncertainty (particularly as it pertains to the new administration), recession, reduced hours and job security, and the continuing fluctuations in the stock market impacting retirement plan values.  A significant change in mindset among companies will continue, focusing on:

•          Short-range thinking and the increasing importance of annual incentive plans
•          The need to “keep a steady course”
•          The effect of the bailout on executive compensation
•          Predicting market values of pay in a volatile labor market
•          Composition of total compensation package

CRI believes that the next few years will be extremely trying for many companies.  General industry is expected to learn very valuable lessons as a result of the current economic crisis, including the need for better planning, increased accountability, and the need to ensure continuity in operations in uncertain economic times, particularly for their employees, a company's most important assets.  The design of compensation programs in the future will certainly address these issues, ensuring a closer relationship between performance, pay, and the company's ability to afford such actions.

For more information or to order the survey, please contact Andrew Sellers at (877) 934-0505 x115