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New Hay Group Report Reveals Recession's Impact on Employers Worldwide

By Rebecca Regan

Republish: EasyPublish™ Published: 30Apr2009 Word count: 485 Viewed: 206 time(s) Get Free Content For Your Site

The Hay Group recently released results from their March '09 "Reward in a downturn" survey that highlights key tactical and strategic changes global employers have taken in response to the deep recession. Some key observations reported in these results resonate with what we know to be true through our daily experiences at work or from the recession's direct impact on our own family and friends.

Merit Budgets Severely Reduced As you may recall from only a few short months ago (though it seems much longer given the depth and length of this recession), 2009 merit projections averaged just below 4%. Fast forward to March, '09 where the reported overall projected salary increase has been downgraded to 2.8%. Further compounding the issue of too few dollars to make merit increases meaningful, the report identified the revised merit budget for high performers at just 3.0%.

This slim differential of .2% between "all employee" and "high performers" follows the conventional wisdom that the dollars simply aren't there to make any meaningful difference in rewarding the two groups based on their performance. According to this report, at least 25% of all employers are now budgeting zero pay increases across the board for 2009.

Impact to Executive Pay

Executive pay now is a laggard to other employees in terms of merit pay increases. With executive pay under scrutiny, executives can expect lower total compensation packages based upon diminishing bonuses and falling stock prices. Executives are projected to receive an even smaller merit increase of 1.5% versus the 2.5% allotted for management and clerical employees. The report identified top cost-cutting changes implemented globally by employers: layoffs, freezing temporary pay and promotions, and reducing benefits. Middle Management Becomes the Next Target Middle management is slated to become the next target for reduction of expenses through job elimination. While executive jobs salaries are more frequently being frozen than those of other employee groups, organizational and job restructuring to reduce staff levels is highest amongst white collar employees. Because there are more white collar employees than executives, the resulting higher number of restructures or job reductions produces greater labor cost savings to employers. More Key Findings

Other key findings (and corresponding percentage of surveyed companies taking these steps):

* HR programs are being decreased or eliminated (27%)

* Overtime pay has been eliminated (19%)

* Use of contractors has been cut (30%)

* But...few companies are eliminating or decreasing health care benefits (5%) or savings plans (3%) * A substantial number (38%) are making design changes to their bonus/incentive plans

* Long-term incentive plans have dropped significantly, by an average of 37%

* Not surprisingly, employees are most concerned with job security (88%)

* Employers are primarily concerned with the ability to retain top performers (89%) and maintaining a motivated workforce (91%)

Hopefully, we've hit the bottom of the recession and these statistics won't head further south, but only time will tell. To learn more, see the executive summary of the March 2009 "Reward in a downturn" survey on The Hay Group's website. http://www.haygroup.com/ww/Index.aspx

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