A slim majority of firms in a salary-budget survey said they plan to return to normal pay practices this year, but many companies said they would turn to non-monetary rewards.

In response to the sluggish economy, many companies either froze or cut pay in 2009. Even as the economy starts showing signs of life, a majority plan to remain conservative as to pay practices in 2010.

The WorldatWork 2009-10 Salary Budget Survey, January 2010 Update (fielded in October 2009), found that 52% of U.S. employers froze pay for some or all employees in the 2009 recession, while 13% cut pay.

Will employees see their pay restored in 2010?

At least 22% of organizations that froze pay in 2009 are planning to prolong the freeze into 2010, while 54% plan to resume normal pay activities this year. More than a third said they were in a recession (in October) and weren't in a position to unfreeze pay.

Of those organizations that cut pay, 37% said they remained in a recession and weren't yet considering recovery actions; 29% planned to restore pay in full, while 15% said the pay cuts were permanent.

"Employers are taking a ‘wait and see' stance when it comes to returning to normal pay practice," says Jim Stoeckmann, CCP, compensation practice leader at WorldatWork. "There are risks both ways. Moving too fast in restoring salaries and merit budgets leaves employers vulnerable if the recovery fails to materialize. Moving too slowly creates the risk of turnover as employees look for a better opportunity with another company. Even with jobs scarce, there are always opportunities for employees with the right skill set."

As salary budgets remain tight and employee satisfaction low, organizations are turning to other ways to motivate and reward employees. Employers are focused on providing or enhancing career-development opportunities (33%), non-cash rewards and recognition (28%), leadership training on employee motivation (21%) and flexibility options (20%). But monetary rewards were seen for high performers (19%) and for mission-critical talent (15%).

"With lower-than-normal employee-satisfaction levels, it is crucial for employers to center the employee-value proposition on the entire total rewards package," says Alison Avalos, research manager for WorldatWork.

"Employers can cultivate employee loyalty by highlighting non-cash rewards, particularly for key employees.

These programs validate the employee's time, effort and talent, even in the absence of salary increases."

About the survey: The WorldatWork 2009-10 Salary Budget Survey/January 2010 Update was fielded in October 2009. Survey respondents are WorldatWork members employed in the HR, compensation and benefits departments of mostly large U.S. companies. A total of 875 responses were received.