Preliminary data from Mercer (2009/2010 US Compensation Planning Survey) for 2009 shows that roughly 70% of employees in non-executive positions received salary increases that averaged 3.2%. For the same non-executive group, 88% are expected to get slightly smaller raises in 2010. [See our May 2009 E-Notes regarding the practice of broadly withholding salary increases.]

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Executive positions, however, have faired much worse when it comes to salary increases. In the same survey, only 56% of executive positions received increases in 2009 that averaged 3.5%.

Further, we recently did an analysis of 2009 proxies for select insurance providers. It revealed that many CEOs and other top executives (the majority of the sample) did not earn a salary increase or annual incentive for 2008 performance. However, long-term incentives grants (generally options and restricted stock) were granted to most senior executives in the proxy sample early in 2008 in amounts seen in prior years—or somewhat lower.

Bottom line: The 2009 salary emphasis seems to be on keeping the general employee happy and in-place while letting the guy in the corner office feel the pain—may be a bit of theatre here. However, if I were on the Board of Directors, I would aggressively be using long-term incentives to keep my CEO and other key players happy this year—we can fix their salaries later.

We expect to see more salary data reported for 2009 and predictions for 2010 in mid to late summer. What a crazy 12 months--we found it almost impossible to predict how salary increases and structure movements would come out for 2009 based upon changing conditions and are glad to see some logic and stability in the early data. Perhaps 2010 will bring more stability and a return to somewhat normal practices.

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"Eighty Percent of my Sales Force are not making their numbers! No one will earn a bonus this year! What should I do?"
In a recent workshop that I taught on the subject of sales force compensation at the University of Wisconsin, one of the participants outlined a dilemma he faced—80% of his sales force would not earn a bonus due to factors beyond their control. His question: What to do?

Many executives are facing similar situations today and while the "rule" says that no bonus should be earned, common sense suggests another course of action.

We recommend that executives faced with such a dilemma make a conscience decision to write new sales-payout rules for 2009. These new rules should assure that the top players will all get a payout—in spite of bad luck or poor economic times. It should work something like this:

• Top 1/3 of the sales force earns a uniform bonus payout (say $15,000—the amount is your choice—but usually less than a "par" bonus)
  
• The next 1/3 will earn half of the top 1/3 (say $7,500); and
  
• The bottom 1/3 earns no bonus.
  

What is the benefit? You have told your best sellers that they mean a great deal to the company and we want then around in 2010 and beyond—and you can be assured that they will be inclined to stay. And, you have also sent a message to the poorer performers.

We have often told clients that a badly-designed sales pay plan becomes a discretionary plan in the end. Well, I guess this fellow has a discretionary plan this year.

Can you rank your top performers high to low? I bet you can. Do it today!