LINCOLNSHIRE, Ill. — Although pay raises were at an all-time low last year, most employees around the world can expect to see a slight rebound in salary increases in 2010, according to a survey by Hewitt Associates, a global human resources consulting and outsourcing company. To see a significant increase in compensation this year, workers will need to focus on meeting their performance goals, as companies continue to allocate a greater portion of their compensation budgets toward variable pay programs that reward and retain high-performing workers.

Hewitt's global compensation survey of more than 6,000 large companies in 46 countries revealed that projected average pay raises around the world will increase or stabilize this year compared to 2009. However, these amounts are still considerably lower than pre-recession salary increases.

While base salary increases continue to lag, more than 80 percent of companies around the world are offering variable pay programs—or performance-based awards that must be re-earned each year. Companies that offer a variable pay program anticipate marginally higher spending this year—3.0 percent as a percentage of payroll—up slightly from 12.7 percent in 2009.

"While employees around the world will see a slight increase in salary adjustments for 2010, they shouldn't expect these increases to return to prior levels anytime soon," said Shekhar Purohit, Hewitt's Global Compensation Consulting leader. "Over the past decade, and increasingly in the past year, variable pay has become the standard as companies reward strong performance and lower overhead costs. We expect this trend to continue in the coming years."

Salary and Variable Pay Trends by Region
Factors such as inflation, unemployment rates and available talent pool, have an impact on a country or region's average salary and variable pay levels. For example, countries such as Argentina, the United Arab Emirates and Turkey are likely to see higher-than-average salary increases this year to offset higher inflation rates. In emerging markets such as India and China, however, salary increases are expected to be significantly higher than predicted inflation rates. This indicates that there are other factors, such as the demand for talent, that are strongly influencing proposed salary increases.

North America
According to Hewitt's survey, salary increase budgets in North America are expected to bounce back slightly this year, but are still projected to be much lower than the increases given in 2008 and 2009.

Base pay increases for U.S. workers are projected move up to 2.7 percent in 2010, up from 1.8 percent in 2009—the lowest on record since Hewitt began tracking this data in 1976. At a time that Hewitt recorded some of the lowest salary increase budgets in its history, variable pay budgets for U.S. companies were at an all-time high. Spending on variable pay as a percent of payroll for salaried exempt employees in the U.S. was 12 percent in 2009. Hewitt projects 2010 budgets to be in line with that at 11.8 percent.

Canada is also expected to see modest improvement in base pay increases for 2010. Salary increases are expected to be 2.8 percent, up from 2.2 percent in 2009. Spending on variable pay as a percent of payroll is expected to drop slightly in 2010 to 9.6 percent, from 10.1 percent in 2010.

Asia Pacific
Most companies in the Asia Pacific region are taking a conservative approach to salary increases this year, primarily driven by high inflation rates and tough economic times. Overall, 2010 salary increases in the region vary greatly by country.

Some countries in Asia will see stronger rebounds, motivated in large part by the war for top talent. For example, salary increases in China are projected to jump to 6.8 percent in 2010 from 4.7 percent in 2009.

On the other hand, Japan is expected to see marginal increases of 2.1 percent in 2010, while Indonesia and India are expected to have the highest increases of 8.8 and 9.7 percent respectively. Similar to other regions, employers in Asia are increasingly using variable pay as a means for attracting and retaining talent and rewarding high-performing workers. Hewitt's survey estimates that more than 87 percent of companies are offering variable pay programs this year. Of those, employers are budgeting 13.0 percent as a percentage of payroll for variable pay in 2010, similar to 2009.

Europe
For most Western European countries, average salary increase budgets for 2010 are projected to be in line with 2009 growth estimates. The predicted salary increases in Western Europe are expected to vary, with this year's lowest increases predicted for Switzerland at 1.9 percent and the highest for Italy at 3.3 percent.

In Eastern Europe, the picture is more varied by country. For example, the Czech Republic can expect salary increases to be 3.0 percent in 2010 while employees in Turkey will see salary increases rise to 6.8 percent, largely driven by high inflation.

Most organizations in Europe (91 percent) offer variable pay plans—the highest of any other region. Of those, variable pay budgets as a percent of payroll in Europe are expected to increase significantly to 12.5 percent this year compared to 10.5 percent in 2009.

Latin America
Varying economic and political conditions across Latin America make it difficult to generalize salary increase trends across the region. For example, significant inflation and mandatory salary increases driven by government and/or unions are contributing to jumps in salary increases in Argentina and Brazil. According to Hewitt's survey, 2010 salary increases in Brazil are expected to be 5.7 percent, down just slightly from 2009 (5.9 percent). Salary increases in Argentina are also expected to rise from 13.6 percent in 2009 to 15.2 percent in 2010.

Organizations in Latin America place a high value on variable pay programs. Ninety-one percent of companies in the region offer variable pay plans, with spending as a percentage of payroll expected to be 17.5 percent in 2010.

Hewitt's survey revealed that some countries in Latin America are ahead of the game when it comes to compensation practices. Companies in Mexico, for example, have stabilized salary increases and are now focused on differentiating high-performing and high-potential employees and rewarding them accordingly.

About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewitt.com.