BONUSES
Companies freeze pay and bonuses as recession bites
Nearly seven in ten organisations are withdrawing bonuses that would normally be awarded, new research by Innecto Reward Consulting shows.
Innecto surveyed 238 HR professionals from a wide range of organisations, both in the private sector (including representatives from banking, retail and construction) and not-for-profit sector:
59% said they were freezing pay in 2009
69% were not awarding bonuses this year.
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Justine Woolf, senior consultant at Innecto, said: “Year-on-year pay increases and annual bonuses have become the norm in recent years. The loss of both pay increase and bonus represents a significant reduction in salary for many people and a difficult reward situation which most HR managers have never encountered before.”
Companies that freeze pay without addressing their reward schemes are going to be at a major competitive disadvantage, Woolf reckons. “Productivity tends to go down as employees lose their financial incentives to achieve objectives, and the differential created as some companies do increase their pay makes it harder to attract and retain talent. Catching up will require larger pay rises in the future, something which the business may not be able to sustain.”
Assess total reward
Woolf recommends HR managers in this position carry out an assessment of their total reward to make it more efficient, targeted and better structured towards achieving the goals of the overall business. “HR managers might dread the thought of an empty pay pot at bonus time but with a bit of careful work, they can refine and develop their reward package to create something that is much more effective than the existing one,” she said.
Want to know more?
The survey was carried out by eMedia for Innecto Reward Consulting in April 2009. For more information contact Holly McEnaney at Innecto, tel: 07743 800639.
Innecto says: “We provide bespoke specialist advice and delivery capacity to help you manage the reward agenda within your organisation, from building a pay strategy through design of process and structures to actual delivery of projects. We are leading experts in designing bonus schemes, undertaking salary benchmarking, conducting job evaluation and facilitating reward strategy.” More details are available at www.innectogroup.co.uk.