New York, NY (PRWEB) August 23, 2005 — What’s in store for 2006? Research organizations have made their predictions, but unstable oil prices can cause even the most positive projections to take a drastic turn.

According to Michael Maciekowich, National Director of Astron Solutions, organizations need to review 2006 salary budget projections with a cautious eye. “While inflation and unemployment levels have remained steady throughout 2005, this may change as we get closer to 2006. The price of a barrel of oil, now priced in the upper $60s, may ultimately have an impact on the nation’s unemployment rate. By diverting spendable cash to the fuel pump, and away from non-durable goods (electronics, etc.) companies may end up with a surplus of goods, causing them to reduce production. These events can lead to layoffs and a higher unemployment rate. Higher unemployment often leads to reductions in salary raises, due to the increased supply of workers.”

However, economists in the federal government are optimistic. The Congressional Budget Office (CBO) http://www.cbo.gov believes that the economy is growing at a healthy pace. The CBO believes that real gross domestic product (GDP), which is the total value of all goods and services, factoring in inflation, over a certain period, will grow by 3.7 percent in 2006, before slowing to a pace of 2.9 percent.

What then, according to recent economic projections, can we expect in the coming year in regard to compensation budget planning? The CBO forecasts a percentage change of 1.9% (down from 2.4% in 2005) in the Consumer Price Index and a 5.2% unemployment rate (no change from 2005).

According to the 2005-06 WorldatWork Salary Budget Survey, we should expect to see a slight drop in the use of variable pay programs in 2006. In 2005, the average budgeted incentive for exempt employees was 12.7%. The projections for the average budgeted incentive in 2006 reveal a possible decrease to 12.2%.

The following is a summary of 2006 average preliminary base pay budget levels (all base pay adjustments including merit, promotions, and market equity) for twelve key industry groupings from the sources above. Information was compiled from recently published studies by Mercer Human Resource Consulting http://www.mercerhr.com/pressrelease/details.jhtml?idContent=1188070 , The Conference Board http://www.conference-board.org/utilities/pressDetail.cfm?press_ID=2645 and World at Work http://www.worldatwork.org/ .

Industry - 2006 Base Pay Adjustments
Business and Information Services - 3.9%
Computer Software Services - 3.8%
Legal and Accounting Services - 4.0%
Education - 3.3%
Finance and Banking - 3.7%
Healthcare - 3.6%
Hospitality - 3.7%
Manufacturing - 3.6%
Real Estate - 3.3%
Retail - 3.6%
Transportation - 3.6%
Insurance - 3.7%

The following is a summary of projected salary range or structure adjustments by industry group at the exempt salaried level:

(source: 2005-06 WorldatWork Salary Budget Survey)

Industry - 2006 Salary Structure Budget Adjustments
Business and Information Services - 2.2%
Construction - 2.3%
Education - 2.2%
Finance and Banking - 2.4%
Healthcare - 2.5%
Hospitality - 2.7%
Manufacturing - 2.7%
Real Estate - 3.1%
Retail - 2.5%
Transportation - 3.6%
Insurance - 2.4%

Curious as to how the United States compares to the rest of the world? The following statistics were taken from Executive Resources Limited (ERL) http://www.erlimited.com/ 2005-06 Salary Increase Projections. If you start to get concerned about your own budget adjustments, just be grateful that you aren’t instituting employee salary increases in Zimbabwe!

Country - 2006 Inflation Projected - 2006 Increases Planned
Australia - 2.5% - 4.0%
Belgium - 1.6% - 3.0%
Brazil - 7.4% - 6.9%
Canada - 2.3% - 3.0%
China - 3.6% - 5.1%
Egypt - 9.6% - 9.8%
Finland - 0.5% - 2.0%
France - 1.8% - 3.8%
Greece - 2.8% - 4.5%
Irish Republic - 2.6% - 3.4%
Italy - 2.0% - 3.8%
Japan - 0.1% - 2.0%
Mexico - 4.4% - 6.0%
Nigeria - 16.1% - 16.2%
Norway - 1.2% - 3.5%
Puerto Rico - 2.7% - 4.0%
Russia - 8.2% - 10.0%
Spain - 2.8% - 5.1%
Sweden - 0.8% - 3.0%
United Kingdom - 1.8% - 3.2%
United States - 2.6% - 4.2%
Zimbabwe - 120.0% - 120.0%