Results from Culpepper’s annual survey of base salary increases reveal that most organizations plan to increase base salaries at a slightly lower rate in 2009 than in 2008. Despite high oil costs and inflation, few companies are adjusting 2009 salary increase budgets higher to account for increases in the costs of living.

Instead of increasing the fixed cost of base salary budgets, many companies are reporting a shift towards providing employees with variable, performance driven awards. Alternatively, to help employees offset the high cost of gasoline, an increasing number of companies are reporting the use of telecommuting programs.

Most executives maintain an optimistic outlook for 2009, with only two percent of companies planning to freeze salaries for all employees.

This year’s report on base salary increases includes data from 683 organizations reporting salary increase data for 90 countries. Respondents were asked to provide actual base salary increases for 2008 and projected base salary increases for 2009.  

Key Survey Findings

• Most organizations adjust base salaries on a common focal date, typically in
  January, March, April, and July.

• Nearly two-thirds of companies have a base salary philosophy to “match the market”
  and pay salaries at current market levels.

• Base salary increases for the U.S. are projected to decline slightly from 3.93% in 2008
  to 3.86% in 2009.

• Base salary increases for Canada are projected to increase slightly from 3.66% in 2008
  to 3.68% in 2009.

• Base salary increases for countries in the Eurozone are significantly lower than other
  countries in Europe that have not adopted the euro as their official currency.

• Base salaries are growing at a faster rate in Latin America and Asia-Pacific
  than other regions of the world.

• Countries with the highest average projected base salary increases for 2009:
  Venezuela (19.78%), Sri Lanka (16.56%), and Ukraine (15.44%).

• Countries with the lowest average projected base salary increases for 2009:
  Switzerland (3.47%) and Japan (3.52%).

Timing of Base Salary Increases
Most companies adjust base salaries on a common focal date (Figure 1). Twelve percent of companies provide base salary increases on the anniversary of an individual employee’s date of hire.
 
Eight percent of companies have alternative approaches for the timing of base salary increases. The most common alternate approach is having separate focal dates for different groups of employees. Another approach is having a mix of common focal dates for some groups of employees and an anniversary of hire date for other groups of employees.

For companies using a common focal date, the most common months to increase salaries are January, March, April, and July (Figure 2). 

Base Pay Philosophy
Nearly two-thirds of companies have a base salary philosophy to “match the market” and pay salaries at current market levels (Figure 3). Only six percent of companies try to “lead the market” and pay above market salary rates, and only four percent of companies try to “lag the market” and pay below market rates. Eight percent of companies report having different base pay philosophies for different groups of employees.

Global Overview of Base Salary Increases
On average, global base salary increases are projected to decline slightly from 4.23% in 2008 to 4.18% in 2009. Tables 1 and 2 provide average aggregate actual base salary increases for 2008 and projected base salary increases for 2009 for major geographic regions throughout the world. 
 

Table 1: 2008 Actual Base Salary Increases by Global Region
	% of Companies Freezing Salaries in 2008	Average Actual Base Salary Increases for 2008 (including zeros)	Average Actual Base Salary Increases for 2008 (excluding zeros)
Global / Worldwide (Aggregate)	2%	4.23%	4.38%
Northern America
Canada	1%	3.62%	3.66%
United States	2%	3.85%	3.93%
Latin America	2%	5.78%	5.94%
Mexico & Central America [1]	<1%	4.89%	4.94%
Caribbean & West Indies [2]	<1%	4.25%	4.29%
South America [3]	2%	6.43%	6.67%
Europe	2%	4.27%	4.42%
European Union (All) [4]	2%	4.18%	4.34%
European Union (Eurozone) [5]	2%	3.66%	3.75%
European Union (Non-Eurozone) [6]	3%	4.43%	4.59%
Europe (Non-European Union) [7]	3%	5.44%	5.65%
Middle East / Africa	3%	5.75%	5.93%
Middle East [8]	4%	5.28%	5.50%
Africa [9]	2%	6.44%	6.58%
Asia-Pacific	2%	5.88%	6.13%
Asia [10]	2%	6.13%	6.44%
Pacific [11]	2%	4.04%	4.16%

 

Table 9: 2009 Projected Base Salary Increases by Global Region
	% of Companies Planning to Freeze Salaries in 2009	Average Projected Base Salary Increases for 2009 (including zeros)	Average Projected Base Salary Increases for 2009 (excluding zeros)
Global / Worldwide (Aggregate)	2%	4.18%	4.28%
Northern America
Canada	2%	3.59%	3.68%
United States	1%	3.81%	3.86%
Latin America	2%	5.94%	6.07%
Mexico & Central America [1]	0%	4.98%	4.98%
Caribbean & West Indies [2]	0%	5.14%	5.14%
South America [3]	3%	6.70%	6.89%
Europe	2%	4.04%	4.16%
European Union (All) [4]	2%	3.92%	4.03%
European Union (Eurozone) [5]	3%	3.75%	3.85%
European Union (Non-Eurozone) [6]	2%	4.16%	4.26%
Europe (Non-European Union) [7]	1%	5.82%	6.92%
Middle East / Africa	2%	5.67%	5.76%
Middle East [8]	2%	5.41%	5.53%
Africa [9]	0%	6.68%	6.68%
Asia-Pacific	1%	5.87%	6.05%
Asia [10]	2%	6.15%	6.34%
Pacific [11]	3%	4.17%	4.28%

Additional Base Salary Increase Data Tables
In addition to the data tables and figures above, we provide a more comprehensive report
with 38 additional data tables with actual base salary increases for 2008 and projected base salary increases for 2009, including:

• United States

  • Breakouts by number of employees, industry sector, and corporate status

  • Breakouts by type of job (Executives, Operations Managers & Professionals, Sales Managers & Reps, Technical/IT Managers & Professionals, Scientific Managers & Professionals, Healthcare Services/Clinical Managers & Professionals, and Hourly/Non-Exempt Employees).

• Canada

  • Breakouts by number of employees, industry sector, and corporate status

  • Breakouts by type of job (Executives, Operations Managers & Professionals, Sales Managers & Reps, Technical/IT Managers & Professionals, Scientific Managers & Professionals, and Hourly Employees).

• Latin America

  • Breakouts for Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico, Peru, Uruguay, and Venezuela.

• Europe

  • Breakouts for Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovakia, Spain, Sweden, Switzerland, Turkey, Ukraine, and the United Kingdom.

• Middle East & Africa

  • Breakouts for Cameroon, Israel, Kenya, Lebanon, Morocco, Saudi Arabia, South Africa
    and the United Arab Emirates.

• Asia-Pacific

  • Breakouts for Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand,  Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, and Vietnam.

The comprehensive version of this report with additional data is available to:

• Participants in 2008/2009 Salary Increase Budget Survey

• Subscribers of Culpepper Pay Practices & Policies Surveys

Budget Compensation Costs Wisely
In this time of economic uncertainty, it is critical to attract top talent and retain star performers who will drive your organization’s success in difficult market conditions. You cannot afford to guess about compensation rates of key employees or make "across the board" salary increases or freezes. A modest investment in current market data will help you allocate your compensation dollars wisely and in the right places.

Culpepper Compensation Surveys provide the data you need to establish competitive and effective compensation plans. Comprehensive data is provided on base salaries, salary structures, incentives, allowances, total cash compensation, equity-based compensation, pay and benefits practices, as well as job descriptions.

Impact of Economic Downturn on 2009 Compensation Plans
This Culpepper Pay Trends Survey focuses on how the recent financial crisis and economic downturn has impacted compensation plans and budgets for 2009. If you are responsible for compensation in your organization, we invite you to participate in this survey. After you participate, you will be able to view preliminary results online. We will e-mail participants detailed results when the final report is available early December.
Participate and View Results