'Pause' button hit for deep staff and pay cuts

by HCA24 Jun 2009

Peter Promnitz, Mercer

Australian and New Zealand companies 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 in these tough economic times, according to Mercer's latest Leading Through Unprecedented Times global survey.

The survey revealed that almost half of all Australian and New Zealand (ANZ) respondents plan to hire key talent while at the same time reducing their overall workforce for the remainder of 2009. Fifty-seven per cent of ANZ respondents plan to make further workforce cuts in 2009, but only 1.2% will make cuts of 10 per cent or more. Additionally, in the next six months 46.5% plan to freeze salaries at 2008 levels, but 53.4% will make 2009 pay increases as planned. However, more than two thirds (62.5%) said their 2009 bonus payments will be reduced.

The survey, conducted in May, includes responses from more than 2,100 organisations with employees and operations in more than 90 countries, with 88 responses from companies with operations in Australia and New Zealand.

Mercer's chief executive in Australia, Peter Promnitz, said the survey indicated that although Australian and New Zealand companies were containing employment costs they were also being opportunistic in trading-up their workforce in an economic downturn.

"Companies are taking the opportunity in a downturn to reduce staff in under-performing areas and replace them with higher quality people, more experienced and more productive people that they may not have been able to afford in a tighter labour market.

"The War for Talent is still fresh in people's minds and we're seeing companies managing their key talent a lot more closely in tougher economic times," he said.

The survey also revealed companies are not yet confident of a recovery; 85% of respondents from Australia/New Zealand said it was very likely or somewhat likely that they will experience reduced business and financial performance in 2009 when compared with 2008.

"Australia and New Zealand have not escaped the global economic turmoil, but we have not been as deeply impacted as many other developed nations, and despite lingering uncertainty in our market, companies are generally not slashing employment expenses such as pay and benefits in response to the economic downturn," said Promnitz.

"We're seeing lessons learnt from the past about the medium to longer term risks of cutting too deep - and I mean both workforce and pay cutting - which we believe will hold our local companies in good competitive stead when we do reach a recovery," he said.

Despite the fact the survey shows employers are taking a wait and see approach to workforce cuts, job security tops the list of employees' concerns. Eighty-four per cent of ANZ respondents said their employees were concerned about job security - 45.5% of those were significantly concerned.

"Job insecurity in the workforce can impact productivity and these results should be a timely reminder for employers that open communication and strong leadership are potentially more important than ever," Promnitz said.


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