Deteriorating Business Conditions Result In Substantial Changes To Organization Pay Programs, Says Hay Group Global Survey

Nearly Half of Companies Report Freezing or Decreasing Staffing Levels

PHILADELPHIA, PA, December 12, 2008 - The number of organizations that expect business results to be significantly worse than targeted levels for 2008 has more than doubled since March, according to management consulting firm Hay Group’s latest Global Employee Pay and Staffing Survey. When Hay Group conducted a similar study in March 2008, only 12% of organizations expected their business results to be significantly worse than targeted levels. However, eight months later, that number has jumped to 31%. Sixty-two percent of organizations indicate that business results are staying the course, and are expected to be close to targeted levels in 2008. Among the 2,589 organizations across 6 continents that responded to the survey, Africa and the Middle East have been the least impacted by the downturn – with only 9% of African companies and 12% of Middle Eastern companies reporting business results significantly below target.

Retail is one of the hardest-hit sectors, with 63% of retail respondents expecting poor business results due to reduced consumer spending and a tightened credit market. Other industries, such as oil and gas, have been able to weather the downturn more successfully – 19% of oil and gas respondents expect business results to be significantly better than targeted levels.

“While not all regions, countries and industries are impacted equally, many organizations are feeling at least some effects of the downturn,” says Nick Boulter, global managing director, client development and reward services at Hay Group. “With next year’s economic outlook uncertain, organizations 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 programs to focus on retaining high performers.”

Other key findings from the Hay Group Global Employee Pay and Staffing Survey:

  • Staffing Freezes and Decreases Globally: Nearly half (48%) of organizations globally are decreasing or freezing existing staffing levels, up from 20% in the March study. For those planning layoffs, median staffing level decreases are approximately 7.5%. Only 3% of organizations globally are planning to increase staffing levels.
  • Base Salary Increases Getting Cut: One of the biggest areas for cuts is base salary increases –sixty-five percent of respondents are making changes or considering changes to their previously established base salary increase budgets for 2009. Of those organizations, 58% are decreasing their budgets and 24% are freezing or considering freezing salaries for all employees.
  • HR Programs Hitting the Chopping Block: Training and development programs are being decreased or eliminated by 16% of organizations responding to the survey. Companies are also cutting overtime wages (11%) and the use of contract laborers (17%). However, most are keeping benefits programs relatively in-tact at this time, including health and retirement plans.
  • Employees Worry about Job Security the Most: Respondents reported their employees’ top concerns center 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.
  • Companies Worry Most about Top Talent: Consistent with the findings from the March survey, the top concerns of organizations 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.

“In these uncertain times, if employees’ concerns are not addressed and acknowledged, organizations 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,” said Boulter. “Organizations must take care to avoid knee-jerk reactions that seem to help the organization in the short-term, but may compromise long-term viability. HR leaders can zero in on a few areas to help steer their organizations through tough times including clear and frequent communication, strategic cost-cutting, retaining top talent, re-evaluating reward programs and helping employees understand their total reward package.”

Additional information about Hay Group’s Global Employee Pay and Staffing Survey can be found at www.haygroup.com/ww/press/index.aspx?ID=87.

About the survey
A total of 2,589 organizations from 91 countries across six continents participated in Hay Group’s Global Employee Pay and Staffing Survey in November 2008, demonstrating that the effects of the downturn are being felt worldwide. In terms of the participant base, this is the most comprehensive study of this subject that is available. Data collected include organizational changes to base salary increases, variable pay programs, and long-term incentives as well as planned changes to other reward-related programs (e.g., overtime, use of contractors, benefit plans, car programs, and training and development).

About Hay Group
Hay Group is a global consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective, and motivate them to perform at their best. With 88 offices in 47 countries, we work with over 7,000 clients across the world. Our clients are from the private, public, and not-for-profit sectors, across every major industry and represent diverse business challenges. Our focus is on making change happen and helping people and organizations realize their potential.

For more information
For more information, including requests for interviews, please contact Aven James at +1.212.584.5472 or aven@blisspr.com, or Gretchen Steinmiller at+1.212.840.1460 or gretchen@blisspr.com.

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