Personnel(ly) Speaking
Personnel Management Systems, Inc.
What to do about pay…
Most of us like things to be as predictable as possible and what to pay employees has always been fairly predictable. If your company is like most companies, each year you would review salary data and set wages for the coming year. Some companies might be more sophisticated and have established salary ranges or formal compensation plans, but in the end, we simply strive to have our pay levels competitive with everyone else’s.
Well, welcome to 2009. Like everything else, pay levels are topsy-turvy, unpredictable and frankly, just confusing. This of course makes HR people crazy so we turned to our local comp expert, Doug Sayed with Applied HR Strategies, for help.
Here are some of his keys points that we found interesting:
· Salary increases and merit budgets have plummeted to a new record low. Planned merit budgets for 2009 have fallen from nearly 4% (depending on the study) to as low as less than 2% in February (1.5% according to the most recent data from Watson Wyatt, although this is mostly from very large public companies).
· 42% of companies have already put some salary freezes into place, a dramatic increase from only 13% two months ago.
· More than half of companies (52%) have already conducted layoffs, up from 39% just two months ago. However, the number of companies planning future layoffs has fallen ten percentage points from 23% to 13% (most likely because most organizations that were considering layoffs have already taken some action). However, if the economy continues to weaken, layoffs will continue to rise, and a growing percentage of companies will begin their second or third rounds of layoffs.
· Short-term incentive funding (variable comp, annual bonuses, etc.) has not changed substantially since last fall, with the vast majority of companies continuing to budget for variable pay programs at roughly three-quarters of recent year levels. While most companies continue to budget variable pay dollars at fairly high levels, the likelihood of those bonus dollars paying out anywhere near target funding levels is virtually guaranteed to drop significantly from 2008 payouts.
· Twelve percent of respondents (up from 3% in December) have lowered their company 401(k) or 403(b) match. We have also heard of several companies eliminating their 401(k) and 403(b) matches altogether at least until the economy improves.
So, what does all this mean? I suppose it means that at least for this year pay increases will be small or nonexistent; layoffs will continue to put downward pressure on compensation overall; variable pay plans will become more prevalent and at least in the short term will result in lower payouts; and automatic 401(k) matches may be a thing of the past. Or, like our budgets, we can just say that our comp plan will have to remain as fluid and as flexible as the changing economy.
Need help? Feel free to call Doug or us anytime.
Doug Sayed, Applied HR Strategies www.appliedhrstrategies.com (425) 827-3881
Personnel Management Systems, Inc. www.hrpmsi.com (425) 576-1900
Personnel(ly) Speaking is a monthly comment on HR issues of importance. It is intended to provide general information and must not be construed as legal advice. Reproductions are allowed as long as credit for this information is given to PMSI. We welcome your comments, questions, and concerns. © PERSONNEL MANAGEMENT SYSTEMS, INC., Corporate Office (425) 576-1900, Colorado Office (720) 497-0200, www.hrpmsi.com.