Managers feeling pay squeeze

Jun 02 2009 by Nic Paton Print This Article

More and more managers are seeing their wages being squeezed as firms direct scarce resources to rewarding sales staff or others who bring in revenue. But will this devaluing of management cause long-term damage?

It is senior staff and managers who are bearing the brunt of salary and pay freezes in this recession, with six out of 10 firms keeping the lid on executive pay and more than half doing the same for senior management.

By comparison, under half of sales teams are feeling the pinch and just a third of general office, clerical, production and service roles, according to research by consultancy Mercer.

Whether it's because in the current climate management teams simply don't believe they can be seen to be rewarding managers, whatever their performance or achievements, is unclear.

But for hard-pressed managers who have had to deal with everything this recession has thrown on them, the findings are likely to feel like a kick in the teeth at just the point when many organisations are beginning to breathe, if not a sigh of relief, then certainly more easily.

Mercer's quarterly salary indicator survey analysed remuneration trends within 75 blue-chip, multinational organisations with around 3.5 million employees globally.

What it found was very mixed approaches to remuneration in the current economic climate, with nearly half of the HR directors interviewed saying their organisations had already instigated a salary freeze, while 15 per cent said their firms were considering it. A further four out of 10 said it was not currently on their company's agenda.

But going into the findings in more detail revealed some sharp discrepancies. Six out of 10 they were freezing pay for executives and more than half doing so for senior management, against 45 per cent for sales teams and 36 per cent for general office, clerical and production and services roles.

Intriguingly, nearly six out of 10 said they were increasing their salary budget for manufacturing and service staff, with a simlar percentage doing so for office and clerical staff, and half were making increases for professional staff. This compared with 46 per cent increasing pay for managers and 37 per cent for executives.

"Remuneration, like any strategic decision, has to be evaluated in a strategic framework," said Chris Johnson, head of Mercer's human capital business in the UK.

"Companies need to keep customers, remain efficient and provide safeguards for the future. Many are putting effort into analysing their businesses, categorising their staff and reviewing the pay elements for each category.

"Freezing the pay for essential revenue-generating staff can be counter-productive as you may lose them and their revenue to a competitor: there is a strong case for increasing their rewards as long as they perform," he argued.

Most companies were still determining pay on a localised and individual basis, according to need and performance, with performance-related pay still an important part of the mix, even if budgets have become much tighter this year.

"Trade union negotiations also have a substantial impact. Many companies approach pay negotiations on a long-term basis and find themselves bound by agreements negotiated in the bounteous years of 2007," warned Johnson.

"There will be some intense bargaining ahead as companies try to meet promises made to their workforce, while remaining realistic. In return, the unions should have realistic expectations," he added.

More than nine out of 10 remained committed to reviewing staff salaries on an annual basis, with the majority also maintaining the proportion of fixed to variable elements within their current pay mix.

Yet, when asked if they would be making revisions to their variable pay plans, there was a clear split between those who would (slightly more than half) and those who wouldn't (slightly under). Nearly four out of 10 were altering other non-cash aspects of their reward plans.

The majority of HR directors polled also remained pessimistic about the prospects for the UK economy, with just a tenth believing the economic outlook would improve this year.

Two thirds did expect a pick up in 2010, with a quarter not seeing an upturn until after 2010.