More U.S. companies thawing salary freezes

Tuesday, Aug. 2, 2005 | 9:14 a.m.

Salary freezes have all but disappeared for millions of American workers as a stronger economy has prompted companies to lift pay caps and even slightly increase raises.

The good news: The number of employers reporting salary freezes for some or all employees has dwindled to 2 percent this year from a high of 16 percent in 2002, according to a July survey by Mercer Human Resource Consulting. More employers also are supplementing salaries with cash awards, signing bonuses and other incentives.

Employers plan to grant average pay increases in 2005 and 2006 of 3.6 percent, which is a slight uptick from a year ago, when pay increases averaged about 3.5 percent.

The drop in the number of companies with hiring freezes reflects employers' concerns that those with a freeze will lose workers or job candidates to competitors. Also, those with freezes have fallen behind pay scales of other companies in their industry.

But salary freezes are still in place in industries facing challenges, such as autos and airlines, says Ravin Jesuthasan of professional services firm Towers Perrin.

"Most organizations are providing for nominal pay increases," he says. "(Pay increases) are a continued reflection of uncertainty. Companies are hesitant to do anything that locks them in."

The Mercer survey includes responses from nearly 1,350 employers and reflects the pay practices for close to 13 million workers.