How the Economy May Affect Your Salary in 2009

With the start of the New Year, employers will be finalizing their salary budgets for 2009. Many survey vendors collected, compiled and analyzed data regarding merit increases for 2009 and reported that merit budgets for 2009 were on track to remain consistent with previous years' averaging at around the 3.5% mark.

As more economic turmoil surfaced toward year end, some organizations took a new look at merit budget plans for 2009 as we discussed in the article Pay Increases in 2009 May Disappoint Workers in our December 30th newsletter. Most employers are being cautious, preparing for long-term economic difficulty and keeping their options open for 2009.

So what does this mean for employees?

Not every employer will select the same course of action in light of the current economic situation. In fact some companies may decide to not decrease their merit budgets at all.

Employers who do reduce their merit budgets may choose to give small, across the board increases in an attempt to be "fair" or they may choose to significantly reward only the top performers while giving good or average performers a small increase or no increase at all. Some employers may push out or delay increases until later in the year and some may impose a salary freeze.

It is reasonable, however, for you to ask your manager how your company plans to handle merit increases in the coming year and have an open dialogue about what to expect in the coming months.

Employers will need to get more from every merit dollar spent and make sure that top performers are adequately rewarded. They will need to differentiate more between levels of performance when considering performance-based merit increases and be able to explain these decisions come review time. It is likely that good performers may get less of an increase than expected so that the top performers can be appropriately rewarded. Good performers near the top of their salary range may see no increase at all.

This all means that it is important for you to discuss expectations for the coming year with your manager to make sure that you both know what your goals are for the coming year and how your achievement of those goals will be measured and assessed. Find out where your salary falls in your current pay range and ask how that affects the amount of increase you may be eligible to receive. For more tips on salary negotiation read our article Get the Raise You Want.

Most employers know that pay increases alone won’t work as a way to attract and retain employees. In fact, the current economic situation presents employers with an opportunity to institute more creative ways of rewarding individuals and letting them know that their contributions are appreciated.

Employers will more likely need to consider alternative rewards such as employee development, training, additional vacation time and work-life balance options such as telecommuting and compressed work weeks as additional features to their rewards program in order to attract, retain and reward key employees

If increases are expected to be small or not occur at all, consider proposing some non-monetary rewards that would help soften the blow. For more tips on how to approach this, read our article 6 Tips to Successful Benefits Negotiation.

Small increases, no increases or pay freezes are not meant to de-motivate employees. In tough economic times, it is often a necessary evil to ensure economic stability and longevity for the enterprise and limit the need for layoffs. Remember that sacrifices made now, may help the enterprise as a whole survive difficult financial times and help to ensure that you remain gainfully employed.