Local Workers Bringing Home Fatter Paychecks

Government Contractors Drive Salary Gains, Survey Finds

Despite a dismal U.S. economy, employers in the region offered raises averaging 4.7 percent this year, according to a survey by the Human Resource Association of the National Capital Area.

The association, which has issued the report for nearly three decades, sent its survey to 2,800 companies, organizations and agencies in the Washington-Baltimore region. It received responses from 339 companies that employ more than 370,000 full-time workers, including Freddie Mac, the National Association of Social Workers, American University, Carlyle Group, Raytheon and BearingPoint.

The survey found that in the year ended in March, salaries in this region continued to rise because of competition for highly skilled staffers by government contractors. Employers are offering raises that surpass the national average, as well as bonuses to woo workers or to keep their most valued employees from jumping ship.

Last year's Compensation Survey Report, which had 236 of the same companies participating as this year's, said local companies gave out raises of 3.5 percent in the year ended in March 2007.

The surge in salaries has spilled over to nonprofit associations, which increasingly must scramble for good workers.

"We have to be competitive with corporate America, including the consulting firms, because we share the same talent pool," said David A. Fogle, vice president of finance and administration for the National Business Group on Health. The District-based organization, which advises Fortune 500 companies, not only offered raises comparable to those of private-sector counterparts but two years ago opted to pay 90 percent of employees' health benefits rather than the standard 70 percent, Fogle said.

The Washington area's unemployment is lower than that of the nation as a whole. The U.S. unemployment rate in August rose from 5.7 percent in July to 6.1 percent, with a loss of 84,000 positions. In the District and in Northern Virginia, the rate was 4.1 percent in July, and it was 3.5 percent in the Maryland suburbs, according to the Bureau of Labor Statistics.

"Demand for workers has driven the cost [of salaries] so high," said Jesse T. Cantrill, a compensation consultant who helped oversee the survey. As companies recruit nationwide, Cantrill said, people "have to be lured into our economy by higher pay."

According to the survey, salaries climbed in 214 of 302 job categories, particularly in the software and system development and health-care sectors. For instance, this year's survey showed median pay for information technology specialists rose to $77,100, compared with $58,200 in last year's survey. But unlike the heady days of the tech bubble, when the riches were spread throughout a company, employers today limit the most generous raises and bonuses to their most-prized workers, according to the survey. In 2007, 74 percent of employers said they offered "variable pay" -- bonuses and bigger raises to their most valued employees, In 2004, when the job market began tightening, 45 percent of survey respondents said they were offering variable pay.

The big raises and bonuses "are not distributed evenly among all jobs," said Angelo Kostopoulos, president of Akron, which conducted the study. "They are focused on the people who matter the most."

Forty-one percent of survey respondents said they paid recruits a signing bonus in 2007, compared with 29 percent that said they did in 2006. In some cases, recruits were paid more than existing employees doing the same work, Cantrill said. Twenty-three percent of employers in this year's survey said they paid a retention bonus to workers who stayed for a 10-month period; in the 2004 survey, it was 16 percent. Employers offered more money to workers whose recommendations resulted in a successful hire -- an average of $1,875 in 2007, compared with $1,475 in 2004.

"We're absolutely keeping current with the trend of using referral bonuses," said Michael Kostrzewa, director of human resources for YRCI, a professional services staffing company based in Fairfax. "It's our most reliable source for prequalified candidates."

Contracting firms have introduced a number of incentives to recruit and retain employees -- particularly younger, tech-savvy workers, according to experts. They are offering flex time, raises that kick in as soon as 90 days, leisure activities and tuition reimbursement.

"They're providing fun days, entertainment in the firms and gym memberships," said Deborah Page, technology consultant for McCormick Group, an executive search firm in Arlington whose clients include Lockheed Martin, SAIC, CACI and Northrop Grumman.

Employers said they offered departing employees 19 weeks of severance. In 2004, respondents said they offered 25 weeks.