Michigan employers were more generous with merit pay increases in 2008 than they predicted they would be last January, according to a new study from the American Society of Employers.

“Employers are doing everything they can to stay in business,” said ASE President Mary Schroeder.

“They need to continue to keep employees as well, but they just don't have the budgets that would allow them to give huge increases.”

In a January survey of companies in Southeast Michigan and around the state, 266 respondents projected their merit increase budgets would grow 3.19 percent for nonexempt employees, or those workers eligible for overtime.

They projected salaried, or exempt employee budgets, would increase 3.37 percent this year, and those for officers and executives would go up 3.51 percent.

In a June survey released in late August, those employers actually reported that nonexempt budgets increased 3.24 percent year over year on average, and officer and executive budgets 3.7 percent, outpacing company projections.

But budgets for salaried employees increased just 3.33 percent, falling below projections.

“Basically what this is telling us is our employers were a bit more generous than they anticipated in January,” Schroeder said.

Still, Michigan's merit raises are below national average projections, she said.

Watson Wyatt Worldwide Inc. reported that national merit increases averaged 3.5 percent nationally for 2008.

According to WorldatWork, an international association of human-resource professionals and business leaders, merit increases across the nation beat projections this year, rising about 3.9 percent, on average.

“Michigan is behind national increases, which makes sense given our economic situation,” Schroeder said. “If we look back to the year 2000, merit increases were at about 4.2 or 4.3 percent. They've steadily declined since then.”

Despite the economy, Michigan employers are optimistic in their projections for merit increases next year.

They are projecting an average merit increase of 3.3 percent for nonexempt workers in the coming year, 3.4 percent for exempt employees and 3.7 percent for directors and executives, on par with this year.

Still, those projections are below the 2009 national average forecasts of 3.5 percent by Watson Wyatt and 3.9 percent in WorldatWork's 35th annual salary budget survey.

About 9 percent of the 266 Michigan respondents, or 24 companies, said they don't plan to give any merit increases at all, Schroeder said.

She said those companies aren't expecting an economic turnaround and are preparing for 2009 by freezing salaries, eliminating or reducing overtime and bonuses, instituting hiring freezes, or extending the length of time between merit increases to 18 months, just as they did last year.

“That is something we watch,” Schroeder said. “If salaries aren't moving ... your employees aren't going to stay with you.”

Wow! Internet, Cable & Phone gave its 265 Michigan employees at sites in Madison Heights, Taylor and Livonia merit raises this year averaging 4 percent, on par with the merit raise averages of its other U.S. employees, said Janice Turner, vice president of human resources.

The Denver-based company plans to keep merit raise averages at about the same level this year, she said, in Michigan and across the U.S.

“Even though the economy in Michigan is on a down spiral, we still expect our wages to be competitive, and we reward our employees based on their performance in the previous year.”

“The overall goal is to retain employees,” Turner said.

Sherri Begin: (313) 446-1694, sbegin@crain.com