Taking stock: Moving into a new financial year

by HCA01 Jul 2009

There is no doubt that the first half of this year has been a challenging one for organisations - be they small or large. As we close the books on this financial year and prepare to enter the next, it's useful for HR leadership to take stock of how the downturn has impacted staff and employment costs, and what challenges may emerge in the year ahead, both for organisations and their people.

Research conducted by Mercer indicates that Australian and New Zealand (ANZ) organisations are containing employment costs but have hit pause on making deep workforce or pay cuts for the rest of 2009 - instead, they're looking to 'trade-up' their workforce.

These are the top-line findings from a global survey conducted in May by Mercer. Called Leading Through Unprecedented Times, the survey included responses from more than 2,100 organisations with employees and operations in more than 90 countries, with 88 responses from organisations with operations in ANZ.

Opportunity to trade-up your workforce

The survey revealed that 57% of ANZ respondents plan to make further workforce cuts in 2009.  However, the depth of these cuts is lessening with only 1.2% planning to make cuts of 10% or more, compared to 8.2% of organisations making severe cuts of 10% of more in the previous six months. Overall reductions in Australia for the rest of 2009 are likely to be roughly on par with the rest of the world, with 58% planning cuts, compared with 66% in the six months preceding the survey.

What's particularly interesting is that almost half of all ANZ respondents plan to hire key talent while at the same time reducing their overall workforce for the remainder of 2009. 

These results indicate that although ANZ organisations are containing employment costs they are also taking the opportunity to reduce staff in under-performing areas and replace them with higher quality, more experienced and more productive people that they may not have been able to afford in a tighter labour market.

Lessons learnt in containing employment costs

Despite lingering uncertainty in our market, organisations are generally not slashing employment expenses such as pay and benefits in response to the economic downturn. They've learnt lessons from the past about the medium to longer term risks of cutting too deep or taking a slash and burn approach to employee benefits - this more considered approach is likely to hold local organisations in good stead in a recovering economy.

Almost half of ANZ respondents plan to freeze salaries at 2008 levels, but another 53.4% will make 2009 pay increases as planned.  However, more than two thirds (62.5%) said their 2009 bonus payments will be reduced.

Increased insecurity brings less turnover

It's interesting to note that despite figures indicating organisations in our region are opting for a more cautious approach than elsewhere, job security still tops the list of employee concerns. Eighty-four per cent of ANZ respondents said their employees were concerned about job security - 45.5% of those were significantly concerned.

It goes without saying that such levels of individual concern can have some serious implications for an organisation's bottom line, as a result of decreased productivity, if not appropriately dealt with. However, the other implication of this changing sentiment is that staff turn-over is lessening. For an organisation's HR leadership, it's a timely reminder that open communication and strong leadership can prove soothing antidotes in unprecedented times.

About the author

Peter Promnitz is the CEO for Mercer Asia Pacific