Less pay, more training

Oct 20 2006 by Nic Paton Print This Article

European workers are unlikely to see big increases in take-home pay next year but will be given more training and development opportunities instead, a new survey has suggested.

The study by Mercer Human Resource Consulting of more than 430 companies in Europe, most of them multinationals, found that just 16 per cent were planning to increase their investment in base salary rises next year.

By contrast, almost six out of 10 said they would spend more money on training and career development initiatives for their staff.

Other areas where there would be little extra investment next year included retirement and healthcare benefits, with companies instead saying they were more to invest in annual cash bonuses and non-cash rewards.

Paul O'Malley, principal at Mercer, said: "Many organisations are reluctant to invest more in base pay increases because they do not want to raise their fixed costs.

"By focusing on training, non-cash rewards and bonuses, they retain the flexibility over their investments, and can ensure the highest rewards go to the top-performing employees," he added.

"By investing in employees' careers, companies can build the capabilities to fill crucial skill gaps internally, rather than go through the costly exercise of hiring new people," he continued.

"From an employee's perspective, training and development opportunities are often of as much interest as the contents of a pay packet, if not more so," he concluded.

The survey found that nearly a third of participants planned to develop the talents of existing employees to fill skills gaps, while a quarter were relying on new hires. The remaining participants said they would use a combination of the two.

Employers were most concerned about attracting and retaining talented employees over the next year, with 83 per cent reporting that this was a very important issue.

Differentiating rewards for high performers was ranked as the second biggest challenge, by nearly two thirds of those polled.

Only marginally less important were implementing reward strategies that underpinned business goals and ensuring pay was linked to performance, which were rated very significant by 64 per cent and 63 per cent respectively.

At the other end of the spectrum, just 11 per cent felt that adapting their employee rewards packages to meet the needs of an ageing workforce was an important challenge.

Increasing the choice of benefits available to staff and responding to their preferences were also towards the bottom of the list of priorities, rated as very important by just 16 per cent of companies polled.

"It is surprising that companies are not more concerned about adapting their rewards programmes to suit older workers," said O'Malley.

"Many organisations rely heavily on the skills that their older, more experienced staff bring to the workplace, yet the rewards packages they offer do little to engage these employees," he added.