How can businesses handle 09 salary increases?

According to my friends and clients at Employer Solutions Group (www.esghr.com), with corporate budgets tighter than ever, employers who typically provide yearly salary increases are finding this benefit no longer feasible. In the last several years salary growth has held steady at about 3.5 to 4.0 percent per year. Not this year. Across the country the news is the same: layoffs, salary freezes, and salary cuts – some as high as 20%. Without salary increases, many wonder how to maintain their competitive edge.

However, most employers consider their employees their most valuable asset and remain committed to hiring the best talent. Competitive salaries are one of the best tools used to accomplish this goal. So, what do these employers do? How are employers maintaining their competitive viability in the midst of an economic downturn?

First of all, it is important to understand that available salary surveys may not accurately describe current conditions in the workplace; they are usually derived from old data and results are often overstated. Given the current economy, many employers are freezing salaries and wisely adopting a wait-and-see approach. While this may raise concerns about employee morale, many employees today are glad to be employed and are understanding of cost-cutting measures.

While many companies are struggling, there are plenty who continue to thrive. For these employers, the option remains to provide salary increases. However, there are other equally effective reward mechanisms that are often overlooked. Two of these alternative reward mechanisms are:

- Lump sum merit bonuses. Lump sum bonuses allow employers to reward employees without the continual commitment of a higher salary. This option is attractive for employers who want to reward employees but are concerned about diminished future profitability.

- Variable pay systems. Variable pay systems keep the base salary constant but reward employees for good performance through commission or bonuses. Variable pay is an effective way of aligning employee behavior with the goals of the business.

Designing compensation and pay delivery systems are just two of EGS's many specialties. ESG helps employers throughout the nation navigate the challenges of being an employer.