Massachusetts may be outperforming the rest of the country economically, but Bay State employers appear unconvinced that the time is right for significant salary increases.

The annual AIM Human Resource Practices Report released this morning indicates that companies throughout the commonwealth are planning smaller salary increases for 2012 than their counterparts around the nation. Massachusetts employers predict salary increase budgets in the 2.53 percent to 2.8 percent range, while a recent Culpepper survey revealed salary budgets across the U.S. are projected to increase 2.92 percent to 3.01 percent.

The cautious approach to compensation comes despite the fact that more than two-thirds of the 368 participants in the AIM 2011 HR Practices Survey report business conditions as good to excellent. Twenty-seven percent report fair conditions and 5 percent report business as poor in a state where the unemployment rate of 7 percent remains well below the national jobless rate.

Two-thirds of employers who participated in the survey plan to increase salary ranges in 2012, with an average increase of 2.8 percent. An indication that caution remains the watchword is the fact that one in four companies plans to reduce, freeze, or delay salary increases this year. Only one percent of companies plan to eliminate the 2012 salary increase. These numbers are virtually unchanged from 2011.

“Companies are trying to create human resource strategies that make them the employer of choice in a hiring market that is substantially more competitive than it has been over the past several years, while at the same time dealing with an economy that continues to put financial pressure on the business community,” said Sandy Reynolds, Executive Vice President of the Employers’ Resource Group at AIM.

“The sluggish recovery coupled with spiraling health-care costs have squeezed the resources companies have available.”

The Human Resource Practices Report analyzes data from 368 Massachusetts employers spread almost evenly throughout the commonwealth.  Forty-seven percent of participants were manufacturers, with the majority having fewer than 250 employees.

A few highlights from the report:

• In 2011, 75 percent of companies paid incentives at or above target to their executive and exempt level staff, compared to 60 percent in 2010.
• Employers looking to control the escalating cost of health insurance are evaluating the types of health plans offered to employees, and the cost-share arrangements of those plans. A small number of companies have moved to Tiered Network Health plans and Limited Network Health plans.
• Employers use a mix of techniques to source qualified candidates, with the use of technology taking center stage. One out of every two job openings is advertised online.
• Employers have apparently embraced work-schedule flexibility.

{{cta(‘ae6d8290-e8c5-4265-b100-41d4f6942dee’)}}