European companies are currently so focused on cutting costs through lay
offs, salary and hiring freezes, that they may be setting themselves up for
problems in the medium term, according to recent research by Watson Wyatt.
A survey of 200 companies from across Europe and the Middle East
found that 43 per cent (52 per cent of UK companies) have taken action to
reduce permanent workers. Most have also sought to hold down pay, with
more than 70 per cent looking to reduce their budgeted pay increases in
response to the current economic climate.
“These are clearly sensible measures in these uncertain times, but our
concern is around how companies appear to be using their limited pay
budgets,” said Carole Hathaway, European head of strategic reward con
sulting at Watson Wyatt.
Less than a third of companies are targeting their reward budget on
key employees. Moreover, where this is happening, the focus appears to
target only high performers rather than those with business-critical skills.
“Despite a majority of companies claiming to have a greater focus on
their key talent, few are supporting this by actually targeting their reward
spend on them,” said Hathaway. “Top performers are not necessarily the
same as those with business-critical skills. Few companies appear to
have the reward and performance programs that enable them to make this