Employers across North America are slashing pay raises, eliminating jobs and putting hiring freezes in place to cope with economic uncertainty, according to a new survey. And this is leaving a bad taste in the mouth of top performers, who cite low pay as the number one reason for leaving an employer.
2002 Strategic Rewards
, was conducted by Watson Wyatt. A look at 431 companies shows more than eight out of 10 companies (82 per cent) implemented at least one of the following cost reduction measures in 2002:
•Reduced staff (53 per cent);
•Reduced salary increase budgets (46 per cent);
•Froze/greatly reduced hiring (46 per cent);
•Increased employee contributions for benefits (38 per cent); and
•Eliminated or severely cut bonuses (21 per cent).
“During times of economic stress, there is strong pressure at many organizations to make across-the-board cuts in their human capital investments, even though these changes often hurt more than they help,” said Laura Sejen, Watson Wyatt’s national practice leader for strategic rewards. “The challenge for employers is to invest in strategies that mitigate short-term cost concerns while ensuring long-term competitiveness.”
Top performers leaving
Top performers said dissatisfaction with pay is the number one reason why they leave their companies, followed by dissatisfaction with management and lack of promotion opportunities.
Most (47 per cent) would rather see stock-based rewards cut first when the times get tough while only two per cent of top-performing employees said companies should first cut benefits or reduce salaries and bonuses.
“Companies interested in retaining top-performing employees need to make certain they are using their rewards programs to distinguish between top-performing and average employees,” said Sejen. “Despite research that shows such distinction matters, fewer than 40 per cent of top-performing employees believe they receive moderately or significantly better pay raises, annual bonuses or total pay than do employees with average performance.”
Other key findings:
•Companies still have difficulty in attracting and retaining critical skill employees, but the challenge isn’t as great now as it has been for the last two years.
•45 per cent of companies said it’s difficult to attract critical skills employees while 26 per cent said they have trouble retaining them.
•The health care industry has the biggest attraction and retention challenges. More than 80 per cent of health care organizations said they are having difficulty attracting critical skill employees, significantly higher than the 41 per cent for all other industries.
•Top performers value certain monetary and non-monetary rewards programs more than others. They place the highest value on annual bonuses, stock grants and project incentives. The most valuable non-monetary rewards for top performers are flexible schedules, advancement opportunities and work-at-home arrangements.