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Employee Pay and Expectations in 2010
February 10, 2010
By: Melva Tate
Employees may not be calling their managers and screaming the famous line shared between McGuire and Tidwell in the blockbuster movie Jerry McGuire, but trust in this fact; they are expecting employers to “show them the money” in 2010.
Without question the past 24-months have been difficult for both employees and employers. As consumer confidence dropped, the stock market tanked and banks withdrew lines of credit and refused to grant the smallest of loans, organizations were forced to make difficult decisions concerning their workforce and benefit programs. Many cost cutting decisions were reactive after losing major accounts and month after month declines in profit. Other companies were proactive as business leaders aggressively made cuts in anticipation of reduced sales and profits.
The Sacrifice
Whether proactive or reactive to a struggling economy, these drastic cost cutting efforts made by companies to keep their business afloat through these turbulent times, forced employees lucky enough to retain their job to make unconventional sacrifices. Like it our not, employees were required to take one for the team to remain employed.
Not only asked to embrace an across the board pay freeze, several employees were also asked to give up more of the perks and benefits that drew them to the organization in the first place:
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Mandatory salary reduction - on average 5%
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Reduced hours and elimination of overtime
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Reduced employer 401k match
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Increased shared cost for major medical and dental insurance
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Elimination of bonus and incentive pay
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Termination of company car, cell phone stipend, gym memberships, etc.
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Increased work load and wearing multiple hats
Employee Morale and Engagement
These cost cutting measures, although helpful to a company’s bottom line, have contributed to a sharp decline in employee morale and commitment. As a result, organizations are dealing with low productivity, mediocre quality and poor customer service, not only from the “Average Joe” employee, but from their top performers. These same disengaged employees also report a lack of confidence in management’s ability to move the company forward, no longer seek internal advancement opportunities and are less likely to remain with the company post recession.
But good news is on the horizon. As the economy emerges from a deep recession, reports show that companies optimistically predict a bigger and brighter 2010. As profits increase and rehiring begins at a slow pace, employees who weathered the storm for their organization are expecting to be made whole for their scarifies. Those who experienced a pay reduction in lieu of downsizing will expect to have their pre-recession pay restored. In addition, they are also anticipating those frozen merit / performance pay increases to be issued retroactive. Most importantly the reactivation of the dollar-for- dollar 401k match, performance bonuses and incentives and a host of other perks and benefits are all anticipated.
So how do business leaders hit the reset button and establish the “new normal” for their organizations? Like IBM typewriters and Sony walkman, long gone are the days of large across the board pay increases. Gone are the days of 100% employer paid benefits and gone are the days of luxury company cars and fat bonuses. That is unless you’re working for AIG.
What’s the “New Normal”?
In an effort to keep up with competitors, attract top talent and retain their best performers, organizations paid higher than average salaries and created lucrative bonus and incentive plans. Merit pay increases were far above the 3% median and in some cases were double digits. Benefit programs were loaded with employer paid plans that offered everything from tuition assistance, country club memberships and pet insurance.
To establish the new normal, organizations should first review their strategic business plan to ensure their workforce and benefit programs are in sync with meeting the need of the customer vs. keeping up with competitors.
After establishing the new normal, business leaders should clearly communicate this information to employees before reinstatement of any pay or benefits that were part of cost cutting measures.
The biggest challenge employers will face as the economy recovers is how to reengage their top performers. You may not be able to show them the money, but you can show and them that they are a vital part of your organization. Ensure that employees know that you value their contribution to the company. Listen attentively to their concerns and communicate as frequently as possible, either in person, through electronic media or company newsletters