Compensation Resources, Inc. Releases Its 2004 Year-End Compensation Survey by: Paul R. Dorf, Ph. D. , APD

Upper Saddle River, N. J. - December 2004 - Compensation Resources, Inc. has released the results of its 2004 Year-End Compensation Survey. The purpose of this study was to obtain compensation data used for trending and planning purposes at companies of all sizes and shapes. Data was compiled from survey questions that were developed by CRI and distributed to companies in over 14 industrial classifications, in addition to Not-for-Profit organizations. The survey sampled year-end compensation data from a variety of organizations, collected in October and November 2004.

Results indicated that the average merit/salary increase for all employee functional groups was 3. 9% in 2004, and 3. 8% is the average projected merit/salary increase for all groups in 2005. Companies that have more than 10,000 employees showed the lowest merit/salary increases in 2004 and projected 2005 among all other company sizes. Among all survey participants, the number of layoffs, hiring freezes, and salary freezes are expected to decrease from 2004 to 2005. Results indicated that target awards for Short-Term Incentive Plans are much higher in Publicly-Traded companies as opposed to Privately-Held companies and Not-for-Profit companies. Results also revealed that target awards as a percentage of base salary increase as revenues increase. Overall, in terms of Long-Term Incentive Plans, Non-Qualified Stock Options are the most commonly provided plans, which are closely followed by cash bonuses. Stock Appreciation Rights are the least commonly used Long-Term Incentive Plans. Results also indicated that companies with higher revenues provide many more Long-Term Incentive Plans than companies with lower revenues. Overall, in terms of the Compensation Package Mix, base salary makes up the largest percentage of the mix, followed by Long-Term Incentives and then Annual Bonus/Incentives. Some additional highlights:

MERIT/SALARY INCREASE ACTION EXPERIENCED

Group 2004 Projected Action 2004 Projected

2005 2005

Executive 4. 3% 4. 3% Layoffs 28. 8% 13. 5%

Management 3. 8% 3. 8% Hiring Freezes 19. 8% 9. 0%

Exempt Salaried 3. 6% 3. 7% Staffing Increases 46. 8% 45. 0%

Non-Exempt Salaried 3. 5% 3. 6% Salary Freezes 7. 2% 2. 7%

Hourly/Production 3. 5% 3. 5% Cutbacks in pay 0. 0% 0. 0%

All Groups Average 3. 7% 3. 8%

During the months of November and December 2004, CRI surveyed 104 companies online to inquire about their year-end 2004 bonuses. 43. 3% of the companies indicated that their bonuses would be higher than they were in 2003. In a similar survey CRI conducted in year-end 2003, only 25. 6% of the companies indicated that their bonuses would be higher than they were in 2002.

Some additional details:

CHANGE IN BONUSES

Change Year-End 2003 Year-End 2004

Lower than the prior year 38. 4% 28. 9%

The Same as the prior year 36. 0% 27. 9%

Higher than the prior year 25. 6% 43. 3%

Determining pay strategies can be a very difficult and tedious task; therefore, CRI recommends companies take the following approaches:

understand your employees’ perceptions about the total compensation package;

measure the distinct value of the reward to employee commitment and the organization; and

communicate to your employees about the business and the financial impacts of their rewards.

It is also important to remember that the total compensation package is not just about pay; it is also about the work culture, hours, benefits, career development, and promotional increases.

Compensation Resources, Inc. (CRI) provides compensation and human resource consulting to a broad range of companies including start-up, emerging, and middle market companies. CRI specializes in Executive Compensation, Board Advisory Services, Salary Administration, Performance Management, Salary Administration, Sales Compensation, and Expert Witness services.

For more information on our consulting services, please contact us at (201) 934-0505 or visit our website at www. compensationresources. com. If you would like to order the complete report of the 2004 Year-End Compensation Survey, please contact Kim A. VanDeWalle at 877-934-0505 x 114.

Author:
Paul R. Dorf, Ph.D., APD

About the Author:
Paul R. Dorf, Ph.D., APDCompensation Resources, Inc. provides compensation and human resource consulting to mid-size and Fortune 500 clients as well as public, private, family-owned and emerging companies. CRI specializes in Executive Compensation, Salary Administration, Performance Management, Sales Compensation, and expert witness services. Our reference library boasts over 4,800 surveys. ats(at)compensationresources.com