2010 Benefit & Salary Trends

With the recession still fresh in the everyone's minds, many employers are struggling to develop policies for raises and benefits in 2010. While employers realize that competitive benefits and salaries are essential for recruiting and retaining top talent, cost containment remains a top priority for many U.S. employers.

So what are companies planning for 2010?

Salary Trends
Salary freezes reached a remarkable high in 2009. "When they were looking ahead to 2009, employers planned salary increases of around 3.9 percent, but they gave increases of only 2.1%," said Joseph Kilmartin, managing director of compensation consulting at Salary.com. "I've been in the business 40 years and I've never seen this before" (John Rossheim).

2010 brings with it good news for many U.S. employees--the rebound of the pay raise. Raises are expected to bounce back after being stifled by last year's recession. Although it looks as though the worst is behind us, employers are approaching payroll cost increases with extreme caution. However, this year, fewer companies are planning to eliminate raises altogether. A recent Watson Wyatt (a human resources consulting firm) survey showed only "10% of 900 companies polled are planning no pay raises for workers in 2010, compared with 25% this year" (CNNMoney.com).

Average raise
Watson Wyatt polled 235 large U.S. employers in May 2009 and concluded that on average, companies are planning a 3% raise in 2010 (CNNMoney.com).

Average Pay Raises 2007-2010
2007 = 3.5%
2008 = 3.5%
2009 = 2%
2010 = 3% (Projected)
Other salary trends
  • Performance based pay:
    • "With companies operating on limited budgets, employees can expect their performance on the job to come under increased scrutiny," says Laurie Bienstock of Watson Wyatt. Therefore employees that do not meet performance expectations should expect smaller raises.

    • Some smaller companies are weary of embracing performance based pay due to the legal and regulatory reforms linking pay to performance.

  • Bonuses: 2010 doesn't hold a positive outlook for bonuses, as bonuses are a lingering casualty of the recession.
Benefits Trends

The rising cost of healthcare and the impact of last year's recession have left workers expecting higher costs for employer sponsored healthcare benefits.

2009 Staying@Work Report by Watson Wyatt
  • 42% of employers are witnessing an increase in their workers' use of the company health plan
  • 47% of employers are seeing an uptick in their employees' use of the employee assistance program
  • 30% of employers have noted an increase in workers filing disability claims
  • Unplanned absence is elevating among workers at 22% of U.S. companies
To offset the above numbers many employers are trying to strengthen their benefits programs despite budget constraints.

Trends for 2010:
  • Increased out of pocket costs for employees. According to Watson-Wyatt, more than 4 out of 10 employers will raise deductibles, copayments and out of pocket maximums for health coverage for 2010 (Watson Wyatt September 2009 Survey). They may also stop providing 100% coverage for in network providers.

  • Greater focus on promoting a healthy lifestyle. Employers are offering incentives for employees to get and stay healthy and offering more consumer directed healthcare plans.

    • Wellness incentives. According to SHRM, "Almost two out of three U.S. companies offer programs to keep employees healthy, and 66 percent of those offering programs use incentives, with a healthy number showing a return on investment (ROI) of greater than $1 for each dollar spent."

      Wellness initiatives being started by many U.S. companies involve providing incentives for employees to participate in programs such as health risk assessments, smoking cessation (the most popular), weight loss/fitness, blood pressure control and even diabetes management. Incentives include gift cards, lower premiums and even cash.

    • Improving wellness communication. Employers are providing more health education materials to their employees. They are also increasing the frequency and method of communication to their staff using email, blog posts and direct mail. A study in 2008 by the National Business Group on Health (NBGH) found that "half of the employees surveyed said that the health care communications they receive from their employer and health plan are "valuable or extremely valuable." And 43% said those communications led them to take action to improve their health.

    • Full coverage for preventative services. More employers will be offering full coverage for services such as seasonal flu vaccines, annual check ups and other screenings that are all intended to be preventative.

  • A close eye on spousal/dependent coverage. This year, closer attention will be paid to spousal and dependent coverage. More employers will audit workers to eliminate those dependents whom are not eligible and some employers will require spouses to participate in health risk assessments before granting coverage.

  • Consumer-Directed Health Plans (CDHPs) grow in popularity. CDHPs are rising in popularity since they are being seen as an effective way to control costs. CDHPs usually involve a high-deductable plan with a health savings account. Many employers are offering this as an option rather than a requirement.

  • Fewer health insurance plan options. Many employers are reducing or consolidating the number of plans they offer to employees. For the employee, this may mean changing doctors or paying higher out of network costs.

  • Results matter too. According to SHRM, "The percentage of U.S. companies measuring ROI successfully for health and wellness programs has increased sharply over the years, from 14 percent in 2007 to 73 percent in 2009. Some 83 percent of those who have measured say the programs return better than 1:1 on their investment. In growing numbers, employers are rewarding goal achievement during and after health and wellness program completion."

In 2009, 8% of companies dropped their 401K matching programs, however, plan to restore them again in 2010.

According to Employee Benefit News, "about half the U.S. labor force (75 million workers) lacks access to an employer-sponsored retirement plan, and Americans on their own don't save enough for either retirement or financial emergencies" (Nadler). This is why President Obama may impose a mandatory automatic IRA under his new 2010 budget. If this legislation passes, all businesses must automatically enroll all employees in their retirement or savings plan. For more information, visit this site: http://ebn.benefitnews.com/news/coming-soon-to-a-workplace-near-you-a-mandated-automatic-ira-2682211-1.html.