Senior staff bear brunt of pay freezes

Research carried out by Mercer showed that employers are containing to invest in junior staff while senior managers and executives are bearing the brunt of salary freezes.

Of the HR directors interviewed, 47% said their organisations had already instigated a salary freeze while 15% were considering it. A further 39% said it was not currently on their company’s agenda.

The research showed senior management have been hardest hit by remuneration restrictions and pay freezes, with more junior staff frequently benefiting from remuneration budget increases.

Chris Johnson, head of Mercer’s human capital business in the UK, said: “Remuneration, like any strategic decision, has to be evaluated in a strategic framework. Freezing the pay for essential revenue-generating staff can be counter-productive as you may lose them and their revenue to a competitor: there is a strong case for increasing their rewards as long as they perform.”

Asked about their overall compensation budget changes by employee group, 60% said they were freezing pay for executives and 51% were doing so for senior management.

For professionals such as sales teams, 45% of companies had implemented pay freezes while 36% were doing so for general office, clerical and production and services roles.

Most respondents (91%) remained committed to reviewing staff salaries on an annual basis. The majority (85%) were also maintaining the proportion of fixed to variable elements within their current pay mix.

However, the reward element of salaries was under greater scrutiny. When asked if they would be making revisions to their variable pay plans, the respondents were split between those who would (51%) and those that would not (49%).

Thirty-nine percent of respondents were altering other non-cash aspects of their reward plans.

The majority of the respondents remained pessimistic about the prospects for the UK economy, with only 10% believing the economic outlook would improve in 2009. The majority (65%) expected a pick up in 2010 with a quarter of respondents (25%) being more pessimistic still and not seeing an upturn until after 2010.

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“The messages are mixed and there remains a ‘wait and see’ attitude,” concluded Johnson. “Most companies are using June to review the situation. That will give us some indication about the direction in which salaries will go for the remainder of 2009. In such a fluid environment, we will be carrying out our research on a quarterly basis.”

Data from Mercer’s quarterly Salary Indicator (MSI) analysed remuneration trends within 75 blue-chip, multinational organisations with around 3.5 million employees globally.