On the whole, I wouldn’t spend that expected 3.5 percent pay hike in Bermuda or Hawaii. Suffice to say, that merit pay increase isn’t keeping up with price of milk and sugar, much less gas.

Watson Wyatt Worldwide, a global HR consulting firm, surveyed 1,389 employers globally, including 276 in the U.S., said that employees who exceed expectations may expect to receive between 4.2 percent to 6 percent merit pay increases, so maybe that’s an incentive for you to work harder.

Laura Sejen, global director of strategic rewards consulting at Watson Wyatt, claims that “Employees will view holding merit increase budgets steady as a positive sign that will help them offset inflation and higher energy and food costs.” I beg to differ.

Although employees want to see their employers spend wisely and can deal with belt-tightening measures, low pay raises impact motivation and productivity. Employees will be much more likely to switch jobs to achieve higher compensation, because clearly waiting for a decent raise could be a 2010 event. Does that motivate you?

Wait, it gets worse. The Watson Wyatt survey also finds that 33 percent of employers have not made any formal contingency plans for future economic downturns. Two out of three U.S. employers, however, have a “contingency” plan in place, including:

• Layoffs – 52 percent
• Organization restructuring – 46 percent
• Hiring freeze – 39 percent
• Smaller pay raises – 27 percent
• Salary freeze – 13 percent

Are you motivated or de-motivated by these numbers? Here’s one way to motivate yourself: Gently ask how your employer plans to deal with the economic downturn and how their plans may affect your compensation in the next 12 to 18 months.

That’s precisely the kind of data woven into the DNA of InformationWeek’s 2007 National IT Salary Survey, which is based upon survey results from 7,281 full-time IT professionals.

As my former colleague Chris Murphy reports in a recent issue, “Previously, base salaries were in lockdown mode. In 2004, 2005, and 2006, the median base for staff and managers moved about 1 percent a year–a net decrease considering inflation. This year, the median base pay is up 6.6 percent for managers and 5.7 percent for staffers, well above inflation.”

The study finds that the typical IT manager makes $105,000 in salary and cash bonuses, while the average staffer earns $78,000.

One of the things I like about the study is it asks employees to agree or disagree with psychographic statements such as “I’m highly valued as a business technology professional, and I’m put in a position where I can share my deep experience with colleagues.” Interestingly, only 40 percent of staffers agree with this statement compared to 54 percent of managers.

Among the IT staff and managers currently looking for a new job, more than two-thirds are interested in earning more money. No surprise there. Two in five IT professionals dislike their present employer’s management & culture, which is a fairly high percentage, except when you consider the turmoil this field has experienced the past five or six years.

In a separate item, Marilyn K. McGee points out in The IT Battle of the Sexes, that women in IT who earn .85 cents for every dollar made by their male counterparts, actually have it better than many women in other careers. You have to wonder why women don’t stage a walkout over unfair and unequal compensation policies, but that doesn’t appear to be on anyone’s front burner.

Palmisano, who reportedly earned $24.5 million last year, “could be in line for greater rewards if the computer giant meets performance targets over the coming years,” says the Journal. But then again, why bother? He is eligible to take home $4.5 million a year for life in pension. Is there a point at which his executive compensation package becomes just a little bit demotivating?

So, let’s put ourselves in Sam’s loafers: if you stay at IBM in 2007 you will earn a hefty $25 million. But if you leave to go enjoy that money, your pension pay is at least $4.5 million annually for life, plus you can earn hefty speaking fees. Which would you choose?