Due to the economic downturn and budget cuts, many participants indicated that they are reining in costs by giving greater scrutiny to salary increases, promotions, and restricting out-of-cycle increases.

Additionally, numerous participants indicated that they are holding down base salary increase budgets by shifting more employees to variable, performance driven awards.

Short-Term Incentives (STIs)
Fifty-one percent of respondents indicated that they have a plan for controlling variable, short-term cash incentive costs in 2009. The most common strategies companies plan to use to manage short-term incentives include giving smaller incentives to poor performers, raising performance targets, reducing the size of short-term incentives, and reducing the number of employees eligible for short-term incentives. Only three percent of companies plan to eliminate short-term cash incentives in 2009
(Figure 2).

Fifteen percent of companies were undecided on how they will control short-term incentive costs in 2009.

Note: Participants could select more than one option.

Short-term incentives (STIs) include bonuses, commissions, cash profit sharing, and other variable cash payments earned within a one-year period.

Sales Compensation
The most common strategy companies plan to use to control sales compensation in 2009 is setting larger quotas and sales targets (Figure 3).

Additional methods reported by participants to manage sales compensation costs include windfall policies on commissions earned through little effort, restricting certain accounts from commissions, lowering commissions, implementing flat maximums on earnings from a single contract or sale, changing the pay mix to have a lower base with a higher variable component, increasing sales thresholds before commissions are paid, increasing sales hurdles before higher commission rates are paid, and lowering commission multipliers.

Sixteen percent of companies were undecided on how they will control sales compensation costs in 2009.


Note: Participants could select more than one option.

Long-Term Incentives (LTIs)
The most common strategies companies plan to use to control long-term incentives include reducing the number of employees eligible for long-term incentives and giving smaller awards to poor performers and non-key employees. Other strategies companies plan to use to control long-term incentives include raising performance targets and reducing the size of long-term incentive awards. Only two percent of companies plan to eliminate long-term incentives in 2009 (Figure 4) (Table 4).

Sixteen percent of companies were undecided on how they will control long-term incentive costs in 2009.

Note: Participants could select more than one option.

Hiring Strategies
The most common hiring strategies companies plan to use to control compensation costs in 2009 include limiting hiring to only fill critical jobs, reducing headcount through attrition, and reducing headcount through layoffs (Figure 5) (Table 5).

Additional hiring strategies reported by participants to control compensation costs include reducing headcount through outsourcing, hiring more part-time employees, and increasing offshoring to use labor in lower cost locations and countries.

It’s worth noting that most of the companies reporting a hiring freeze indicated that they plan to backfill critical jobs.

Note: Participants could select more than one option.

Control 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.

Additional Breakouts / Data Tables
In addition to the figures above, we provide a more comprehensive report with data tables showing breakouts by number of employees, industry sector, and corporate status.