Face the Mob - Base Pay Looks Up, But It Smells like a COL Adjustment...

I like to think about how Economics impact HR people.  But sometimes I have no idea what macro trends mean to my business. 

Case in Point - I let Ann Barnes at Compensation Force do the heavy lifting for me from a compensation  perspective, and Ann noted earlier this week the latest merit budget data projecting 2008 is starting to flow in:

"None of the big salary planning surveys have yet released any formal results for 2008, but Mercer HR and Hewitt Associates shared preliminary findings for a recent CNN/Money article which suggest that base pay will increase by an average of 3.8% in 2008.  This is slightly higher than the figures published about a month ago by CompData Surveys."

I have no clue how to feel about an overall merit average like that, and never have.  The best emotion I can summon with that single data point is a proclamation like, "We've spanned the globe looking at compensation trends via our access to the CNN site, and I'm happy to report our across the board budget number for merit increases in 2008 is comparable with national averages".

Ugh.  Quality company newsletter fodder for sure.  Makes me think about a press conference with a presidential spokesperson (pick the president, it doesn't matter), where the spokesperson is providing generic answers and getting absolutely hammered. 

I'd love to get better data regarding what type of percentage of employees are projected to get more than 6% or less than 2%, to get a flavor for what people are doing from the standpoint of performance distribution.   

I'm sure Ann will hit the comments with thoughts on where Generalists like me could find that kind of info (that's why she is on my speed dial blogroll to the right), but it always seems generally hard to find (for a cheap price)...

UPDATE - Ann has already responded with more resources, including the following links - Thanks Ann!

http://compforce.typepad.com/compensation_force/2006/11/typical_salary_.html

http://compforce.typepad.com/compensation_force/2007/04/pay_differentia.html

http://compforce.typepad.com/compensation_force/2007/02/putting_merit_b. 

Comments

[Lisa]

COLA and a locality adjustment last year gave the federal workforce in my area a whopping increase right around the 3% mark. Hard to have such a key piece of total rewards out of our control - politics!

[Ann Bares]

Kris:

You're correct to point out that a 3.8% merit budget gives us very little to work with in rewarding employees. This (the limitations we face in putting much merit into merit pay) seems to be the number one driving force behind the growing prevalence of variable/incentive pay plans at all levels of the organization.

If I may, a couple of posts to point you and your readers to with more data on how organizations are dealing with their merit budgets:

WorldatWork and Watson Wyatt collaborated on a rewards study last year that included, among other things, information on typical salary increase differentiation for low versus high performers. Learn more at the following link:

http://compforce.typepad.com/compensation_force/2006/11/typical_salary_.html

Curious as to what Fortune's "Most Admired Companies" are doing with their merit budgets? A recent Hay study informs us that these organizations do more merit pay differentiation than their peers. Read more about this at the following link:

http://compforce.typepad.com/compensation_force/2007/04/pay_differentia.html

And finally, a recent great article in CFO magazine where the author takes a well-deserved pot shot at so-called merit pay, arguing that our top performers deserve better, and telling us what a few companies are doing to better serve tham. Learn more at the following link:

http://compforce.typepad.com/compensation_force/2007/02/putting_merit_b.html

Happy reading!

[bruce]

Great piece, and I love the links Ann. Wish I saw more companies willing to do what it takes to really reward their best performers.