As we head into the first quarter of 2009, the news for salary increases for 2009 is not good. According to preliminary results from a recent Culpepper Trends Survey on the impact of the economic downturn on compensation plans, 2009 salary increase budgets have dropped by 20 percent from projected salary increase budgets initially reported in August 2008.

In response to the global financial crisis that erupted in mid-September, nearly half of companies have either reduced or eliminated salary increase budgets for 2009. One-third of companies indicated that they are undecided

Since September 2008, base salary increase budgets for 2009 have declined an average of 20 percent from 4.18 percent to 3.33 percent. The percentage of companies planning to freeze salaries in 2009 has increased from 2 percent to 11 percent. Some 7 percent of companies plan to delay salary increases for three to six months. And an additional 23 percent of companies are considering either delaying salary increase or freezing salaries completely in 2009.

A word of advice: in this time of economic uncertainty, it is critical to attract top talent and retain star performers who will drive your organization’s success in difficult market conditions. You cannot afford to guess about compensation rates of key employees or make "across the board" salary increases or freezes. A modest investment in current market data will help you allocate your compensation dollars wisely and in the right places.