Although the recession isn't behind us, most employers are planning to increase wages by about 2.9% in 2011 according to the Hay Group salary budget survey. Salary increase amounts continue to hover around the CPI, with variance between industries, but expect pay raises on average to range from a low of .7% to the high of 3.5%. Given the tight range of increases, most employers will continue to struggle with creating any level of differentiation in pay between top and average performers (the lowest performers continue on average to receive no increase). But bonuses, informal incentives, and lump sum merit awards continue to offer alternatives that provide a strong compensation value to employees while maintaining tight cost controls.

Wages are anticipated to remain flat or below pre-recession levels due primarily to the decision by most employers over the past two years to bypass increases completely, while inflation and rising benefit costs further erode real wages. In the event that the economy does pick up steam, expect to see salary compression - what happens when your existing staff's wages don't keep up with what new hires to the company in similar roles can command coming in the door - and other compensation pressures and related turnover.