The looming recession has prompted employers to look into identifying savings on pay and benefits
AS THE COUNTRY heads towards recession, the need to reduce or control costs has prompted many organisations to examine areas where cutbacks can be made and a number are now reviewing their pay and reward structures. For example, employers are looking at reducing working hours, cutting executive pay and bonuses, and slowing the rate of salary rises to lessen the need for staff cuts and help the business to survive the downturn
Last month, boat builder Fairline Boats introduced a seven-week period of reduced working hours, with staff at four of its production lines working a two-day week, and those on another working a three-day week. On the days when the lines are closed, employees receive 60% of their normal daily wage. Derek Carter, the firm’s chief executive officer, said the move was intended to stabilise the business and ensure production levels matched customer demand. “My team has worked diligently with unions to preserve skill and labour in this labour-intensive and highly-skilled area of manufacturing,” he said.
Similarly, staff at construction equipment manufacturer JCB voted to take a £50-a-week pay cut in October to prevent 350 of their colleagues losing their jobs. As a result the firm made 150 redundancies instead of 500. However, a subsequent round of 398 redundancies, announced in November, showed that such measures may only postpone the need for such cuts.
Senior staff and white-collar employees have also had to accept change. For example, last month UBS introduced a new compensation model for its senior staff after cancelling this year’s bonuses for its group executive board. From 2009, the group executive board, selected senior traders and lead business risk-takers will receive compensation held in reserve and be paid only if the company’s financial results warrant it.
Despite the challenges associated with organisational restructuring, there are a number of advantages for employers, said Gerwyn Davies, public policy adviser at the Chartered Institute of Personnel and Development. He pointed out that redundancy impacts on morale for surviving staff. “When the economy does recover, many employers won’t have the skills readily at their disposal,” he added.
However, Clive Wright, principal at Mercer, warned that employers wanting to change employees’ pay and benefits packages should first establish the business implications of doing so. “Some employers looking at benefits will need to conduct a staff consultation before changing them because they are part of their [contractual] terms and conditions. Some contracts will need cancelling and reissuing, which is even more complex,” he explained.
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