U.S. workers can expect median base salary increases of 2.8% in 2011, compared to 2.4% in 2010, while executives and skilled trades workers can anticipate a 2.7% increase, according to the Salary Budgets Survey by the Hay Group.

"Relatively speaking, a forecased median 2011 base salary increase of 2.8% is good news for employees who, over the past two years, saw the lowest salary increases in decades," says Tom McMullen, a practice leader of Hay Group's North American unit. "We found that the number of organizations increasing their staffing levels is double that of organizations that are decreasing their staffing levels."

Still, some companies struggle to design a strategic salary budget that aligns with corporate objectives. In the survey, top performers will receive increases of 3.1%, compared to the 2.8% increase for all employees.

"Organizations have a difficult time differentiating pay increases when the pot of money gets smaller," explains McMullen. "Couple this with the ineffectiveness of many line managers in assessing employee performance, and undifferentiated pay is the outcome. Managers have an opportunity to utilize their suite of total reward programs - all of the financial and nonfinancial rewards that the organization provides - to reinforce the link back to individual and team performance."

The survey findings reflect data on employers' projected salary budgets for 20111, actual budgets from 2010 and forecasts of labor cost reductions. The survey was conducted in Noember 2010, and includes data from 468 employers.

"Despite the optimism in our latest data, the contraction in the U.S. economy will not be reversed overnight, and neither will the return to the 3.5% to 4.5% base salary increases employees were used to receiving for much of the last decade," McMullen says. "Along with modest base salary increases, we will likely see a continued emphasis on variable pay programs, both incentives and bonuses, as organizations emerge from the recession. Organizations are willing to pay for results, but only if they get those results."

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