Cost Management

Employers alter plans for 2009 salary expenditures

Source: www.mercer.ca

In a new update to Mercer’s 2009 Compensation Planning Survey, approximately 50% of the 175 survey participants report they plan to reduce salary increases for 2009. Responding to economic trends, employers report they will modify planned increases by 0.75% to approximately 3% from the national average 3.8% increase planned in the second quarter.

Reductions are planned across most employee groups, industry sectors and geographies. Even in Alberta, those employers who do plan to cut back call for the same 0.75% decrease to 2009’s salary increase plan.

There are exceptions. Nationally, Trade/Production/Service workers may be treated differently than other employee groups where only one quarter of organizations plan to tighten increases and another quarter is undecided.

The issue of attraction, retention and employee engagement has not gone away.

The public sector also stands out. Only about 16% of public sector employers said that they planned to reduce salary increases for 2009.

Few organizations have reported a reduction in short-term incentive payouts for 2009 with respect to 2008 performance.

Putting the brakes on salary increases is not the only action being taken by employers. 

The table below shows the prevalence of other human resource actions implemented, planned and contemplated.

Cost management might be top of mind, but employers need to take thoughtful actions to protect their talent pool and intellectual capital in preparation for the turnaround:

• The issue of attraction, retention and employee engagement has not gone away—the rules of the game have just been modified slightly. It is no longer attraction and retention at any costs, and it will take planning and creativity for employers to successfully navigate through this new landscape and to fully engage with their employees.
• Compensation and benefits are more than an expense; they are an investment in the long-term viability of the organization. Short-term sacrifices might be necessary, but an engaged and healthy workforce that is paid fairly is an essential component in every organization’s future success. Plan sponsors must balance the actions they take today with a longer-term view of their human capital investments—to weather the current storm but also position themselves for future growth.

The majority of employees appreciate transparent and honest communication during tough economic times and, with knowledge of the “table stakes”, they are often willing to help. Understanding the issues and the tough decisions to be made may not make things any easier, but it may cultivate a sense of “we’re all in this together” and actually improve employee engagement.