Merit Increases Mean More Savings For Employees

When Marcia Julien sees an increase in her paycheck this month, it's good news for her - and her "new" car.

After trading in her 1991 Honda Civic for a 2001 Saab, Julien wants to be ready for any potential maintenance expenses. With help from a pay raise, she'll put a couple hundred dollars a month into savings just in case something goes wrong with the Saab.

Marcia Julien

"It's better to be prepared and put something into savings than nothing," said Julien, event coordinator for the Sarah P. Duke Gardens. "I know that eventually, something will break, so I want to be ready and have the money I need for repairs."

Julien is among eligible employees at Duke who will receive a performance-based merit increase in their pay this month. The university balanced budgetary challenges from the economic downturn by providing only $1,000 lump-sum payments in 2009 to staff making $50,000 or less, and another $1,000 lump-sum in 2010 to staff earning $80,000 or less. With a return to the performance-based merit increase program, some employees are using the extra in their paychecks to buy something special, pay bills or save for the future. 

"We are fortunate to be in a position to recognize the hard work and contributions of our staff and faculty this year through a merit increase program," said Kyle Cavanaugh, vice president of administration. "Together, with our comprehensive benefits program, Duke remains one of the premier employers in the nation."

Duke's return to merit increases comes as the economy tries to recover from the worst downturn since the Great Depression. In North Carolina, the unemployment rate remains at 9.9 percent, higher than the national unemployment rate of 9.2 percent. Public universities are facing drastic budget cuts, and the state government recently passed a law to freeze the pay of state employees for the next two years. About 7,600 state employees lost jobs in June, which includes community college and university faculty and staff.

Nationwide, many organizations remain in a conservative mood when it comes to pay increases.

Sue Smith

A recent poll by the Society for Human Resource Management found that 23 percent of respondents worked for a company that not only had a salary freeze in place but had no plans to discontinue the freeze. This comes at a time when 48 percent of American workers don't expect a raise and 19 percent face furloughs, according to Glassdoor, a website focused on finding and sharing information on jobs and companies.

"It's clear that the psyche of American workers has been measurably shaken as a result of recent discouraging economic reports," said Rusty Rueff, Glassdoor career and workplace expert, who ran global HR departments at Electronic Arts and PepsiCo. "While company layoffs have abated in recent months, employees may be preparing themselves for what they think will be another round of belt-tightening if the economy doesn't improve." 

That kind of news is why Sue Smith, an admissions officer with the Nicholas School of the Environment, is excited to receive her first salary increase in three years. She plans on doing something special for herself like saving up for art classes. But, Smith also noted that with the economy still slow, she will save for her future, too.

"I have my retirement plan set to take a percentage of my pay, so when I see my raise, I'll be putting exponentially more in my account," she said. "I think it's very important to set aside any extra money that comes in."