U.S. Employers Keeping Pay Raises Steady for 2009, Watson Wyatt Survey Finds

One in Three Employers Do Not Have Contingency Plans For Further Economic
Slowdown

WASHINGTON, July 23 /PRNewswire-FirstCall/ -- At a time when energy costs
are soaring and the U.S. economy is slumping, there is some good news for
workers. U.S. companies are planning to keep pay raises steady next year,
according to a forthcoming report by Watson Wyatt Worldwide, a leading global
consulting firm. The survey also found that one-third of companies have not
made any workforce contingency plans in the event the economy continues to
falter.
In its survey, Watson Wyatt found that U.S. employers are planning to give
workers merit increases that will average 3.5 percent next year, identical to
the increase workers received this year and just slightly lower than the 3.6
percent average increase in 2007. Companies also say they plan to provide
larger raises to their better-performing employees. Employees whose
performance ratings exceed expectations will receive an average merit increase
of 4.2 percent, while those who far exceed expectations will receive an
average 6 percent increase.
"The economy is no doubt taking its toll on workers, but their 2009 merit
increases appear safe -- at least for now," said Laura Sejen, global director
of strategic rewards consulting at Watson Wyatt. "Employees will view holding
merit increase budgets steady as a positive sign that will help them offset
inflation and higher energy and food costs."
The Watson Wyatt survey also found that 33 percent of respondents have not
made any formal contingency plans for future economic downturns. Two out of
three U.S. employers, however, have at least one formal contingency planning
activity in place. The most common is layoffs (52 percent), followed by plans
to restructure their organization (46 percent), freeze the hiring of
additional workers (39 percent), give smaller pay raises (27 percent) and
freeze salaries (13 percent).
Contingency Planning Activities

Activity Percent of U.S. Employers
Layoffs 52 %
Organizational restructure 46 %
Hiring freeze 39 %
Smaller salary raises 27 %
Salary freeze 13 %
Early retirement window 9 %
Reduced workweek 8 %

"Given the ongoing economic uncertainty, we were surprised by the finding
that so many companies do not have any contingency plans," said Sejen. "We
know from previous recessions and economic slowdowns that those companies that
have contingency plans in place will be in a much better position to weather
the storm and bounce back when the economy improves."
Globally, a vast majority of employers in Asia-Pacific, Europe and Latin
America have contingency plans in place. More than eight in 10 employers in
Asia-Pacific (84 percent) and Europe (80 percent) have established contingency
plans, and seven in 10 (70 percent) of Latin American employers have plans.
Six in 10 Canadian employers (60 percent) have adopted a contingency plan to
be implemented in the event of further economic decline.
"The economic slowdown is clearly having an effect on companies worldwide
and not just in the United States. If economic conditions continue to weaken,
we would expect to see many companies begin to evaluate their staffing levels,
pay programs and overall organizational structures and to implement some of
their contingency plans," said Sejen.
The results are based on Watson Wyatt's Global Strategic Rewards(R) Survey
to be released later this year. A total of 1,389 employers participated in the
survey, including 276 U.S. employers.
About Watson Wyatt Worldwide
Watson Wyatt (NYSE, Nasdaq: WW) is the trusted business partner to the
world's leading organizations on people and financial issues. The firm's
global services include: managing the cost and effectiveness of employee
benefit programs; developing attraction, retention and reward strategies;
advising pension plan sponsors and other institutions on optimal investment
strategies; providing strategic and financial advice to insurance and
financial services companies; and delivering related technology, outsourcing
and data services. Watson Wyatt has 7,000 associates in 32 countries and is
located on the Web at www.watsonwyatt.com.
SOURCE Watson Wyatt Worldwide

Ed Emerman, +1-609-275-5162, eemerman@eaglepr.com, for Watson Wyatt Worldwide;
or Steve Arnoff of Watson Wyatt Worldwide, +1-703-258-7634,
steven.arnoff@watsonwyatt.com