Freeze on hiring has begun as caution takes hold, but most still expect results to meet expectations

Posted by Daniel Palmer on 15th December 2008

The number of Australian and New Zealand organisations that are planning to freeze staff levels or cut back has trebled since March, according to management consulting firm Hay Group’s latest Global Employee Pay and Staffing Survey.

Seventeen per cent of the Australian and New Zealand firms polled said they would cut jobs, while 27 per cent plan to keep employee levels steady. Fifty-three per cent of may change previously-established budgets to increase base salaries in 2009, while 24 per cent may freeze salaries for all employees.

Positive news for the economy was that around two-thirds expect financial results to be close to targets for the year, though a quarter do anticipate results coming in below expectations.

Among the 2,589 organisations across 6 continents that responded to the survey, Africa and the Middle East have been the least impacted by the downturn – with only 9% of African companies and 12% of Middle Eastern companies reporting business results significantly below target.

Retail is one of the hardest-hit sectors, with 63% of retail respondents expecting poor business results due to reduced consumer spending and a tightened credit market. Other industries, such as oil and gas, have been able to weather the downturn more successfully – 19% of oil and gas respondents expect business results to be significantly better than targeted levels.

“While not all regions, countries and industries are impacted equally, many organisations are feeling at least some effects of the downturn,” Nick Boulter, global managing director, client development and reward services at Hay Group, said. “With next year’s economic outlook uncertain, organisations are wary about increasing the fixed cost of base salaries. Many are opting to err on the side of caution by deferring or reducing salary increases or freezing salaries, and are reviewing their reward programs to focus on retaining high performers.”

Other key findings from the Hay Group Global Employee Pay and Staffing Survey:

* Staffing Freezes and Decreases Globally: Nearly half (48%) of organizations globally are decreasing or freezing existing staffing levels, up from 20% in the March study. Only 3% of organizations globally are planning to increase staffing levels.
* Base Salary Increases Getting Cut: One of the biggest areas for cuts is base salary increases -sixty-five percent of respondents are making changes or considering changes to their previously established base salary increase budgets for 2009. Of those organizations, 58% are decreasing their budgets and 24% are freezing or considering freezing salaries for all employees.
* HR Programs Hitting the Chopping Block: Training and development programs are being decreased or eliminated by 16% of organizations responding to the survey. Companies are also cutting overtime wages (11%) and the use of contract laborers (17%). However, most are keeping benefits programs relatively in-tact at this time, including health and retirement plans.
* Employees Worry about Job Security the Most: Respondents reported their employees’ top concerns center around job security, fear of layoffs, salary concerns (e.g., reduced merit and frozen salaries), the cost-of-living and inflation, reduced revenue and customer retention, and lack of a bonus pay-out.
* Companies Worry Most about Top Talent: Consistent with the findings from the March survey, the top concerns of organisations include retaining top talent and critical skills, maintaining and affording competitive pay, maintaining employee engagement and motivation, career development and training opportunities, and recruiting top talent and employees with critical skills.

“In these uncertain times, if employees’ concerns are not addressed and acknowledged, organisations run the risk of a loss in motivation and engagement as well as increased turnover, which could cause a further negative impact on the bottom line,” Mr Boulter warned. “Organisations must take care to avoid knee-jerk reactions that seem to help the organization in the short-term, but may compromise long-term viability. HR leaders can zero in on a few areas to help steer their organizations through tough times including clear and frequent communication, strategic cost-cutting, retaining top talent, re-evaluating reward programs and helping employees understand their total reward package.”