Salary Freezes Start to Thaw as Organizations Rethink Increases for 2010,
According to Hewitt Survey

Few Employers Offer Holiday Gifts or Bonuses, but Majority Will Party

TORONTO , Dec. 10 /CNW/ - A few months ago, Canadian employers were planning to provide average salary increases of 2.8 per cent in 2010, but that number has now dropped to 2.6 per cent, according to a survey conducted by Hewitt Associates, a global human resources consulting and outsourcing company. However, while more than a third of employers were considering a salary freeze earlier this year - providing no increases in 2010 - that number has since decreased. Moreover, even though 81 per cent of Canadian organizations will not provide a holiday gift or bonus, 79 per cent will celebrate the season with employees at a holiday party.

While Hewitt's 31st annual Salary Increase Survey, conducted in the summer, saw employers projecting higher salary increases, as many as 39 per cent were considering salary freezes for the coming year. That number has now decreased to 27 per cent, according to Hewitt's Salary Increase Update Survey of 641 organizations from across Canada . "The vast majority of employers - 73 per cent as compared to 62 per cent earlier this year - are providing raises in 2010, so that far more workers will get an increase next year than originally projected," said Jeff Vathje, Hewitt's Calgary-based national compensation leader. "2010 salary freezes are still more prevalent than the one or two per cent of organizations that typically opt not to provide raises each year. However, the thaw signifies increased confidence in the economy on the part of employers - and that's good news for employees."

The average increase has dipped a little in most parts of the country, other than Saskatchewan, where employees can expect raises of 4.1 per cent, the same figure that was projected earlier this year. Those companies that are planning to decrease their original projections are doing so for three main reasons: the organization is undergoing cost reductions (58 per cent), has concerns about the economy (56 per cent), or is reacting to lower increases planned by its competitors (23 per cent).

Those who have decided to thaw their salary freezes or increase original budgets are responding to the economic recovery (58 per cent), higher increases provided by their competitors (27 per cent), or the fact that their expectations for corporate performance are better than initially forecast (22 per cent).

Renewed Talent Challenges

With the end of the recession, the war for talent will begin to heat up again as demand for skilled workers exceeds supply. "The focus is on both attraction and retention," said Prashant Chadha, a compensation consultant in Hewitt's Toronto office. "Employers are planning to recognize existing high performing employees and attract new talent by offering higher salary increases, greater variable pay payouts, and/or career growth opportunities."

While a differentiated rewards structure that recognizes employees who excel is not unusual, the emphasis on formal career development opportunities is a new tactic, according to Chadha. "Some employers took advantage of the lull in the war for talent during the recession to design detailed programs that chart a course for high performers so that they understand where they're headed at the organization and the training and guidance they'll be offered. If these employees see a clear future at their current employer, they'll be less likely to look elsewhere for a new position."

Employer attention can't be focused solely on high performers, however, when it comes to communication about pay. "Employers need to communicate to all employees their rationale for increasing or freezing salaries," said Maureen Simons , a senior communication consultant with Hewitt Associates in Vancouver . "It's essential that they equip managers to have those conversations so that everyone is sending and receiving the same message."

Simons recommends that employers consider expanding their communication efforts to include personalized total rewards statements. "These statements, whether online or on paper, provide a complete view of all that the employer provides to the individual employee-salary, benefits, retirement programs, time off with pay, and so on," said Simons. "With an understanding of the value of all that they receive, employees may not be as concerned about little or no salary increase."

However, only 39 per cent of responding organizations currently provide employees with total rewards statements. "If employers aren't making employees aware of the value of their total rewards, they run the risk of having them leave to join other companies that may offer more salary, but a poorer overall package. That's a missed opportunity," said Simons.

'Tis the Season

Only 19 per cent of employers will provide their employees with a holiday gift or bonus at the end of this year, generally cash (38 per cent), a gift card or certificate (32 per cent) or a gift chosen by the company (22 per cent). However, for most employees, not receiving a holiday gift or bonus will be nothing new. "Only eight per cent of employers who do not currently offer a gift or bonus did so in the past and have discontinued their program," said Chadha. "The primary reason is the cost of these programs."

That doesn't mean that employers won't be making merry with their staff this season: 79 per cent of organizations will host a holiday party for employees. The most popular type of party is for employees and guests, entirely company funded by 61 per cent of employers. Less common is a holiday celebration for employees only (31 per cent), though 84 per cent of employers foot the entire bill for these festivities - on average less than $100 per employee. "We're seeing a lot of holiday lunches, rather than parties," stated Chadha." Employers want to celebrate the season with their employees and show their appreciation, but need to keep costs down."

About Hewitt Associates

Hewitt Associates (NYSE: HEW) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries, including Canadian offices in Calgary , Montreal , Regina, Toronto and Vancouver , and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewitt.com/canada.

For further information: Marcia McDougall, Hewitt Associates, [phone], [email protected]