Salary increases seen being trimmed in '04.

• Author: Marshall, Jeffrey
• Position: Compensation

The new year didn't bring any good news for employees at many U.S. companies. With the job-creation engine only sputtering to life, and 2003 business results concluded, more than 40 percent of U.S. employers are scaling back their 2004 pay-increase budgets for at least some portion of their employee population, according to a new survey from Mercer Human Resource Consulting. At these organizations, pay increases originally budgeted at 3.6 percent now will average about 3.2 percent.

A survey by Sibson Consulting found a similar projection--average pay hikes in the 3.0 percent to 3.3 percent range.

The Mercer survey, which was conducted in October and included responses from more than 500 employers, provides an update to Mercer's 2003/2004 U.S. Compensation Planning Survey, conducted in April. At that time, U.S. employers had budgeted overall average pay increases of about 3.5 percent for 2004.

At some companies, workers can expect little more than the proverbial lump of coal. "A small number of employers still have budgeted no pay increases for at least some of their employees in 2004, indicating that they can't afford pay increases--especially in concert with rapidly rising healthcare costs and pension funding requirements," says Steven E. Gross, a leader in Mercer's U.S. compensation consulting practice.

Looking ahead to 2004, about half of the employers surveyed are projecting that 2004 incentive payouts will be equal to 2003 levels; about a third expect 2004 payouts to be greater than 2003 levels, and the remainder expect 2004 payouts to be less...