CREDIT CRUNCH
Two-thirds of companies planning to amend salary budgets
With the economic outlook uncertain, organisations are wary about increasing the fixed cost of base salaries. Many are opting to err on the side of caution by deferring or reducing salary increases or freezing salaries, and are reviewing their reward programmes to focus on retaining high performers. That is the main message from a recent survey by Hay Group.
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Key survey results
Base salary increases: As many as 65% of survey respondents are making changes or considering changes to their previously established base salary increase budgets for 2009. Of those organisations, 58% are decreasing their budgets and 24% are freezing or considering freezing salaries for all employees.
Staffing: Nearly half (48%) of organisations globally are decreasing or freezing existing staffing levels, up from 20% in the March 2008 study. For those planning layoffs, median staffing level decreases are approximately 7.5%. Only 3% of organisations globally are planning to increase staffing levels.
HR programmes: Training and development programmes are being decreased or eliminated by 16% of organisations responding to the survey. Companies are also cutting overtime wages (11%) and the use of contract labourers (17%). However, most are keeping benefits programmes relatively intact at this time, including health and retirement plans.
Employee concerns: Respondents reported their employees’ top concerns centre around job security, fear of layoffs, salary concerns (e.g., reduced merit and frozen salaries), the cost-of-living and inflation, reduced revenue and customer retention, and lack of a bonus pay-out.
Employer concerns: Consistent with the findings from the March 2008 survey, the top concerns of organisations include retaining top talent and critical skills, maintaining and affording competitive pay, maintaining employee engagement and motivation, career development and training opportunities, and recruiting top talent and employees with critical skills.
A final word
“In these uncertain times, if employees’ concerns are not addressed and acknowledged, organisations run the risk of a loss in motivation and engagement as well as increased turnover, which could cause a further negative impact on the bottom line. Organisations must take care to avoid knee-jerk reactions that seem to help the organisation in the short-term, but may compromise long-term viability. HR leaders can zero in on a few areas to help steer their organisations through tough times including clear and frequent communication, strategic cost-cutting, retaining top talent, re-evaluating reward programmes and helping employees understand their total reward package.” - Nick Boulter, global managing director, client development and reward services at Hay Group.
Want to know more?
Title: Global Employee Pay and Staffing Survey, Hay Group.
Survey sample: A total of 2,589 organisations from 91 countries across six continents participated in the survey in November 2008. Data collected include organisational changes to base salary increases, variable pay programmes, and long-term incentives as well as planned changes to other reward-related programmes (for example, overtime, use of contractors, benefit plans, car programmes, and training and development).
Availability: Additional information about the survey can be found at www.haygroup.com/ww/press/index.aspx?ID=87.
Hay Group is a “global consulting firm that works with leaders to transform strategy into reality”. With 88 offices in 47 countries, the firm works with over 7,000 clients across the world. To find out more visit www.haygroup.com.