“There’s more demand for good people than supply right now, but companies are trying to hold the line on pay,” Moynihan said.  Many employees in this climate takes time.  A municipality client, for instance, faces difficulties finding both high-level sanitation engineers and lower-level workers, he said.

Moynihan said that average salary increases in 2006 amounted to 3.7%-3.9% but IT pay grew by about 7%-9%.

“IT is a real challenge,” he said.  “We’re not at year-200 Internet economy levels, but the market is really tough in that space.”

Employers are forecasting salary increases of 4% in 2007, according to Compensation Resources’ year-end compensation survey across 12 industries, released in November.  While executives at most firms are slated to receive 4.3% salary raises this year, IT executive pay is set to increase by around 6.2%, the survey showed.

Among publicly traded firms, Moynihan said he expects the trend toward greater executive-pay transparency to continue, with accompanying reductions in such salaries.

“As the ire of shareholders continues to rise over executive compensation, the new teams that come in post-scandal will be reducing those costs considerably.”  Executives already on the job may also decrease their pay packets “to assuage the public,” he said.

Patterns in non-wage compensation, like stock and restricted stock awards, have altered in the past few years due to accounting and reporting law changes, Moynihan said.  Stock options’ popularity has decreased, but the use of restricted stock, which is reported as immediate ownership, is on the rise, he said.

As the cost of benefits, including health insurance, continues to surge by double digits annually, non-governmental employers are finding some savings by shifting more of the burden to employees, he said.

Hali Croner, of The Croner Co. in Kentfield, Calif., said IT talent shortages produced above-budget salary increases in 2006 in online and digital media industries, but bonuses largely stuck to target.

She too, said equity programs are being modified to include a mix of restricted stock rather than stock options alone.

“This has been in response to government regulations, not to hiring pressures or compensation best practices,” said Croner, whose clients include online content and devices, software gaming, television and cable media.

A compensation consultant in suburban Pittsburgh said regulatory changes drove salary increases of 12% and 13% for financial reporting and auditing personnel in 2006, more than triple the national average across all job types.

“Pay for any type of compliance officer, risk manager, or CFO is increasing rapidly,” said Rodney Cottrell, president of Corporate Compensation Partners in Sewickeley, Pennsylvania.  Entry-level accountants’ salaries, for instance, reached $38,000 in the last couple of years, after having stagnated at around $30,000 since the mid-1990s, he said.

Cottrell’s durable goods manufacturing clients paid out lower-than-forecasted bonuses and compensation in 2006, but are expecting better fortunes and higher payouts for good hires in 2007.  Pay increases averaged 3.2%-3.3%, rather than the budgeted 3.5%-3.6% this past year, he said.  Some plants are focusing on so-called clawback measures, which strip salespeople of commissions paid on sales that become bad debt or lone-term accounts receivables.

“This is not something you find in strong manufacturing economy,” Cottrell said.  His financial services clients, however, are singing a different tune.

“They had a fantastic year and are paying out extraordinary sums,” Cotrell said.  Bonuses also exceeded forecasts, but stock option awards continued their four-year slide.

Aside from benefits outlay increases, all employees also shouldered higher workers’ compensation and unemployment insurance costs in 2006, he said.

Frank Glassner, the San Francisco-based chief executive of Compensation Design Group, headquartered in New York, said pay-for-performance is replacing standard cost-of-living increases.

“There’s a significant erosion in anything that might be considered an entitlement,” Glassner said.  “Automatic raises and bonuses are becoming fossils.”

A California-based compensation consultant said salary increases there averaged 4% in 2006, and executive pay climbed higher, to 4.5% and 5%.

“A lot of young professionals and new college grads are leaving the state because they can’t afford to live here, so entry-level positions are going begging,” said Mae Lon Ding, president of Personnel Systems Associates in Anaheim.  Her clients cover an array of industries, from financial services and health care, to IT and manufacturing.

One cost trending higher is overtime pay for IT personnel, resulting from a spate of class-action suits in California, said Ding, who has served as an expert witness in some of these cases, In general, the outcomes are favoring the employees, and most cases are settling before they get to trial, she said.

She, too, said small business are increasingly turning to pay-for-performance incentive plans, which attract motivated employees and also control base pay increases that may hinder employers during bad times.

Financial services bonus payouts were 10%-30% higher in 2006 than the year before, Ding said.  But she expects the mortgage side of the industry to suffer in 2007 amid downturn in the housing market.

Many area manufacturers found their electric bills declining in 2006 compared to 2005, when the chaotic effects of utility deregulation were still being felt, she said. Benefits costs, however, vaulted about 15% in 2006, Ding said.  In response, some employers are cutting the level of health coverage, and costs continue to shift to workers.

Bob Culmer, president of Fulminata Associates in Dallas, said an airline client may soon fill some competitive pay gaps that have developed in the last five years.  The company’s pay increases measured only 1.5% in 2006, about even with those of 2005, Culmer said.  But in an effort to attract and retain employees, the firm may well fatten those raises in 2007.

“This reflects how well they did at the end of 2006 and their confidence that 2007 is going to be better for them.”

Still, the airline is considering outsourcing non-core operations, like IT.  And bonuses were limited to only the highest-level staff, Culmer said.

The Labor Department is scheduled to release the Employment Cost Index for the fourth quarter on Wednesday at 8:30 a.m. EST.

Editor’s Note: Reality Check stories survey sentiment among business people and their trade associations.  They are intended to complement and anticipate economic data and to provide a view into specific sectors of the U.S. economy.