ERI Survey Finds Companies Plan Job Cuts, Not Pay Cuts

Results of a survey conducted by ERI Economic Research Institute to determine organizations' salary and bonus planning for 2002, post September 11.

REDMOND, WA - December 5, 2001 - In the wake of September 11, many consulting groups have been reporting that employee salary cuts are imminent. ERI Economic Research Institute conducted its own survey to find out if these projections are true.

The answer may give you a sigh of relief: organizations are only planning an average 0.1% reduction in salary increases; but there's a caveat -- nearly 1/3 of the 1,600 organizations surveyed are cutting jobs instead of salaries.

Salaries

In general, wait and see seems to be the order of the day. Organizations have yet to alter salary increase plans for 85% of all jobs included in the survey. Small organizations (averaging 1,725 employees) are more likely to report salary plan changes, while large organizations (averaging 15,000 employees) are delaying salary structure adjustments until the economic picture becomes clearer.

One survey respondent said, "Consulting firms inadvertently may be stampeding folks into unwarranted changes."

Overall, organizations say they plan to increase wages by an average of 2.7% in 2002.

As Dr. David J. Thomsen, Director of ERI says, "There appears to be a consensus among companies that merit increases below 2% are not worth the trouble, since they have no motivational effect on employees."

Bonuses

Here organizations' plans are much more conservative. ERI found that 37% of all organizations surveyed are reducing this year's bonuses, and 29% plan to reduce 2002 bonuses.

Layoffs

Corporate staff are most at risk for losing their jobs, as 32% of organizations plan staff reductions. In addition, more contract workers soon may be pounding the pavement, since organizations report a 26% reduction in contract staff.

Background

ERI collected this data November 3-25 in an Internet survey. The 1,652 survey respondents represent both small and large privately-held organizations.

A compensation and benefits research outsource, ERI provides salary, cost-of-living and benefits data to over 10,000 subscribers, including 80% of Fortune 500 companies. ERI offers interactive software, Reference Reports and online surveys, but does not provide fee-for-service consulting. To find out more about this survey or other compensation issues, please visit www.erieri.com or contact info@erieri.com.