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Asian Companies Cut Projected Salary Increase Budget by 4.6% for 2009
added: 2008-12-16

The number of organizations that expect business results to be significantly worse than targeted levels for 2008 has more than tripled in Asia since March this year, according to management consulting firm Hay Groups latest Global Employee Pay and Staffing Survey.

When Hay Group conducted a similar study in March 2008, only 8.0% of organizations in Asia were not confident of meeting their business targets for 2008. However, eight months later, that number has jumped more than three times to 27.1%.

64.5% of Asian organizations indicated that business results are staying the course and are expected to be close to targeted levels in 2008, with 27.1% indicating that results are below targets. Among the 2,589 organizations 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.

The good news is more than two-thirds of companies surveyed are not revising their short-term variable payments programmes (e.g. incentives, bonus, profit-sharing) for 2008. In addition, the vast majority of employers surveyed in Asia are keeping healthcare (83.0%) and pension benefits (94.7%) intact.

The bad news is that the number of companies considering decreasing, freezing and have already decreased/frozen salary increase budgets have more than doubled in Asia in the past eight months from 41.0% to 83.4%. Asian companies have also revised their 2009 salary increases downwards by an average of 4.6% from previously targeted.

Companies are generally wary about cutting incentives and bonuses as it is a reward to employees for their past performance. As bonuses are already accrued for during the year, it is more financially prudent for companies to pay out bonuses than salary increases which will immediately impact next year's bottomline, commented Ms Kala Kularajah, Reward Practice Leader for Hay Group in Asia.

However, employees who have consistently performed well need not worry as more companies in Asia are increasing their investments to retain their high-performing employees, compared to their global counterparts. While base salaries increases and bonus payouts are down across the region, Asian companies are using their salary budget more strategically to reward performance paying an average of 66.7% more base salary increases to their high-performing employees compared to all other employees. At the high end, Malaysian, Hong Kong and Singaporean companies surveyed have doled out an average of 60% more in base salary increases to their star-performers in 2008.

"This trend is a reflection on the shortage of highly-skilled talent in Asia. Companies in Asia know that talent will be a critical factor in getting them through the economic storm and cannot afford to be complacent and assume that their high performers will not have motive or opportunity to leave. The best will always be able to move on and find new opportunities," stated Ms Kularajah.

However, while a quarter of Asian companies have made changes or are making changes to their performance management systems, more can be done.

"2009 is going to be all about performance management. Hay Group's research into World's Most Admired Companies show successful companies are more aggressive in managing their top and poor performers, for example, by enforcing discipline around reward and performance, clearly defining and communicating what good performance looks like, and actively identifying and addressing poor performance," added Ms Kularajah.

Global outlook

Globally, 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 organizations are feeling at least some effects of the downturn," says Nick Boulter, global managing director, client development and reward services at Hay Group."With next year's economic outlook uncertain, organizations 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 Groups 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. For those planning layoffs, median staffing level decreases are approximately 7.5%. 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 65% 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 labourers (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 organizations 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.


Source: Business Wire India

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