HEW Hewitt Associates

In response to the weakening economy and increasing cost pressures, a new pulse survey from Hewitt Associates, a global human resources consulting and outsourcing company, reveals that many employers will be doling out smaller-than-expected pay raises and bonuses to employees in 2009. A significant number of employees can expect to see reduced bonus payouts in 2008 as well. Hewitt conducted a recent survey of 411 large companies to ask whether they plan to make changes to their compensation budgets in light of the recent economic situation. According to the results, 42 percent are revising their salary budgets and variable pay spending strategies related to the economic downturn or because of increasing cost pressures. For these companies, pay raises will decrease by an average of 1.0 percent in 2009. In other words, salary increases for both hourly and salaried exempt employees at these companies are now projected to be 3.1 percent�the lowest projected base salary increase since after 9/11. In addition, almost half of companies making changes to their salary budgets (49 percent) plan to reduce variable compensation payouts, with two-thirds (66 percent) cutting bonuses by more than 10 percent in 2008, and 42 percent of companies planning to do so in 2009. �While the majority of employers are continuing to stay the course with respect to their compensation payouts, increasing cost pressures and concerns about the broader economy have prompted a significant number of organizations to reevaluate and revise their salary budgets,� said Ken Abosch, leader of Hewitt�s North American Compensation Consulting business. �Unfortunately, the result is smaller employee pay raises and bonuses this year, which further tightens the wallets of Americans who are already grappling with higher health care costs, inflation and mortgage expenses. This is a very real challenge for companies, as they struggle to find ways to manage costs during a time when attracting, retaining and motivating employees is more important than ever. As these pressures continue, we expect to see an increased emphasis on variable pay to motivate employees and help them cope with growing economic pressures. These programs allow companies to more effectively manage fixed costs, focus on key business objectives, and motivate and reward employees with bonuses when they attain performance goals. The bottom line is that variable pay is a smarter way to manage a business in a good or bad economy.� There is good news for high-performing workers, however. Hewitt�s survey found that 38 percent of companies are reserving a portion of their salary increase budget for their highest performers, and almost a quarter (23 percent) are creating supplemental, discretionary incentive pools for these workers. Another 20 percent are offering employees retention bonuses for a specified period of employment. In addition to reducing merit increases and bonuses, Hewitt�s survey found that companies who are revising their salary budget projections in 2009 are also considering implementing a hiring freeze (52 percent), layoffs or reducing staff (55 percent), reducing promotions (25 percent), and/or implementing a pay freeze (15 percent). About Hewitt Associates For more than 65 years, Hewitt Associates (NYSE: HEW) has provided clients with best-in-class human resources consulting and outsourcing services. Hewitt consults with more than 3,000 large and mid-size companies around the globe to develop and implement HR business strategies covering retirement, financial and health management; compensation and total rewards; and performance, talent and change management. As a market leader in benefits administration, Hewitt delivers health care and retirement programs to millions of participants and retirees, on behalf of more than 300 organizations worldwide. In addition, more than 30 clients rely on Hewitt to provide a broader range of human resources business process outsourcing services to nearly a million client employees. Located in 33 countries, Hewitt employs approximately 23,000 associates. For more information, please visit www.hewitt.com.