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Ever thought of selling guns and ammo? Don't laugh. It's one of the few bright spots in our rapidly worsening economy.
Sales of guns and stuff are up 8 to 10 percent over this time last year. So are McDonald's "Happy Meals," movie tickets, and the stock of Campbell Soup Company, according to a recent Recession Survival Trends article from MSN.com.
With the economy in a tailspin, consumer wallets slamming shut, and worries about the job market growing (unemployment rate in October, a 14-year high), it sure is comforting (like soup) to know that not everything is taking a hit.
But whether you're selling guns or roses, count on these two corporate mainstays to take a beating: Salaries and Bonuses.
A struggling economy and cost pressures are forcing many companies to freeze, revise, and reduce their salary and bonus plans.
If you're like many companies dealing with a sagging economy and pressure to reduce costs, you'll likely be handing out lower-than-expected salary increases and bonuses in 2009.
This, according to separate October and November surveys conducted by HR consultancies Hewitt Associates, Mercer, and Buck Consultants, as reported by SHRM online.
These firms conclude that a significant number of employees should also expect to see reduced bonus payouts for year-end 2008. (Thank you, Goldman Sachs and UBS).
Base Pay Budgets Under Pressure
Hewitt asked 411 large U.S. companies whether they plan to make changes to their compensation budgets in light of the economic downturn. According to the results, a substantial number of employers report:
* They are revising their salary budgets and variable pay spending strategies (cited by 42 percent of respondents).
* Pay raises will decrease at these companies by an average of 1 percent in 2009.
* Salary increases for hourly and salaried exempt employees at these companies are now projected to be 3.1 percent - the lowest projected base salary increase since the Sept. 11, 2001, terrorist attacks.
Mercer's survey on pay trends, conducted Oct. 3-13, 2008, includes responses from 190 mid-size and large employers across the United States. The survey reported that salary increases planned for 2009 have not yet suffered a major blow from recent financial market events. (This will likely change). Overall, Mercer found:
* Salary budgets for 2009 will rise 3.6 percent for all employees, Mercer projects, which is consistent with the April 2008 projections of 3.7 percent.
* Nearly a quarter of respondents plan to reduce their base pay budgets by one-half percentage point, down to a 3.2 percent increase, from their April 2008 projections (cited by 24 percent of respondents).
Shrinking Workforce
While some industries are relatively unaffected by the current economic environment, Mercer notes that the story behind the fairly static nature of base pay budgets is a reduction in head count. Surveyed companies indicate that they:
* Made staff reductions (30 percent) are planning/are contemplating such actions (37 percent).
* Plan to curtail overall hiring to below replacement levels (32 percent).
* Have curtailed hiring or are considering it (31 percent).
Hewitt found that companies revising their salary budget projections in 2009 are considering implementing a hiring freeze (52 percent), layoffs or reducing staff (55 percent), reducing promotions (25 percent) and/or implementing a pay freeze (15 percent).
Top Performers Still Rewarded
There is good news for high-performing workers. Hewitt found that companies are:
* Reserving a portion of their salary increase budget for their top performers (38 percent of those surveyed).
* Creating supplemental, discretionary incentive pools for these workers (23 percent).
* Offering employees retention bonuses for a specified period of employment (20 percent).
Bonuses and Variable Pay: Down, Not Out
In an environment of soft corporate earnings, companies with weak performance are planning to reduce their overall short-term incentive (STI) payouts and to reduce cash bonuses. Long-term incentives and other variable pay plans are also under pressure and, in many cases, are being revised. According to Mercer:
* Short-term incentives for 2008 performance are projected to decline 20 percent or more across employee groups.
* Executives are expected to earn a STI payout of 35 percent of base pay, down from 40-plus percent for 2007 performance.
For those revising their salary budgets, Hewitt found that almost half (49 percent) plan to reduce variable compensation payouts, with two-thirds (66 percent) cutting bonuses by more than 10 percent in 2008 and 42 percent planning to do so in 2009.
Granting smaller pay raises and bonuses "further tightens the wallets of Americans who are already grappling with higher health care costs, inflation and mortgage expenses," Hewitt says. "This is a very real challenge for companies, as they struggle to find ways to manage costs during a time when attracting, retaining and motivating employees is more important than ever."
Teaming Up
Buck's survey reports a slight shift away from individual and discretionary bonus plans to plans that link payouts to business unit, group and team performance. The most prevalent types of incentives are those that combine business unit and group/individual performance (almost 50 percent) and those based just on business unit results (approximately 20 percent).
"Group and team incentives are powerful tools to improve performance," says Larry Reissman, a Buck Consultants principal. "In an uncertain economic climate, incentives linked to key performance indicators enable employers to focus the efforts of their people and help control compensation costs."
Areas of Opportunity
In a challenging economic environment, Mercer advises taking steps to improve:
* Communication. Your workforce is most concerned about what this shakeout will mean to them. Direct, clear and timely communication from senior management will help employees move past paralyzing uncertainty to a point where they can be productive and even motivated to contribute to improved corporate performance. The objective is to reduce the anxiety and uncertainty about your employees' future employment where possible.
* Engagement. Attraction and retention are no longer synonymous with pay. You need to emphasize the total employment value proposition - including training opportunities, career development and workplace flexibility. These are the important levers that will help you retain and engage your workforces in an affordable and sustainable way, positioning your organization for a business upswing.
Sales of guns and stuff are up 8 to 10 percent over this time last year. So are McDonald's "Happy Meals," movie tickets, and the stock of Campbell Soup Company, according to a recent Recession Survival Trends article from MSN.com.
With the economy in a tailspin, consumer wallets slamming shut, and worries about the job market growing (unemployment rate in October, a 14-year high), it sure is comforting (like soup) to know that not everything is taking a hit.
But whether you're selling guns or roses, count on these two corporate mainstays to take a beating: Salaries and Bonuses.
A struggling economy and cost pressures are forcing many companies to freeze, revise, and reduce their salary and bonus plans.
If you're like many companies dealing with a sagging economy and pressure to reduce costs, you'll likely be handing out lower-than-expected salary increases and bonuses in 2009.
This, according to separate October and November surveys conducted by HR consultancies Hewitt Associates, Mercer, and Buck Consultants, as reported by SHRM online.
These firms conclude that a significant number of employees should also expect to see reduced bonus payouts for year-end 2008. (Thank you, Goldman Sachs and UBS).
Base Pay Budgets Under Pressure
Hewitt asked 411 large U.S. companies whether they plan to make changes to their compensation budgets in light of the economic downturn. According to the results, a substantial number of employers report:
* They are revising their salary budgets and variable pay spending strategies (cited by 42 percent of respondents).
* Pay raises will decrease at these companies by an average of 1 percent in 2009.
* Salary increases for hourly and salaried exempt employees at these companies are now projected to be 3.1 percent - the lowest projected base salary increase since the Sept. 11, 2001, terrorist attacks.
Mercer's survey on pay trends, conducted Oct. 3-13, 2008, includes responses from 190 mid-size and large employers across the United States. The survey reported that salary increases planned for 2009 have not yet suffered a major blow from recent financial market events. (This will likely change). Overall, Mercer found:
* Salary budgets for 2009 will rise 3.6 percent for all employees, Mercer projects, which is consistent with the April 2008 projections of 3.7 percent.
* Nearly a quarter of respondents plan to reduce their base pay budgets by one-half percentage point, down to a 3.2 percent increase, from their April 2008 projections (cited by 24 percent of respondents).
Shrinking Workforce
While some industries are relatively unaffected by the current economic environment, Mercer notes that the story behind the fairly static nature of base pay budgets is a reduction in head count. Surveyed companies indicate that they:
* Made staff reductions (30 percent) are planning/are contemplating such actions (37 percent).
* Plan to curtail overall hiring to below replacement levels (32 percent).
* Have curtailed hiring or are considering it (31 percent).
Hewitt found that companies revising their salary budget projections in 2009 are considering implementing a hiring freeze (52 percent), layoffs or reducing staff (55 percent), reducing promotions (25 percent) and/or implementing a pay freeze (15 percent).
Top Performers Still Rewarded
There is good news for high-performing workers. Hewitt found that companies are:
* Reserving a portion of their salary increase budget for their top performers (38 percent of those surveyed).
* Creating supplemental, discretionary incentive pools for these workers (23 percent).
* Offering employees retention bonuses for a specified period of employment (20 percent).
Bonuses and Variable Pay: Down, Not Out
In an environment of soft corporate earnings, companies with weak performance are planning to reduce their overall short-term incentive (STI) payouts and to reduce cash bonuses. Long-term incentives and other variable pay plans are also under pressure and, in many cases, are being revised. According to Mercer:
* Short-term incentives for 2008 performance are projected to decline 20 percent or more across employee groups.
* Executives are expected to earn a STI payout of 35 percent of base pay, down from 40-plus percent for 2007 performance.
For those revising their salary budgets, Hewitt found that almost half (49 percent) plan to reduce variable compensation payouts, with two-thirds (66 percent) cutting bonuses by more than 10 percent in 2008 and 42 percent planning to do so in 2009.
Granting smaller pay raises and bonuses "further tightens the wallets of Americans who are already grappling with higher health care costs, inflation and mortgage expenses," Hewitt says. "This is a very real challenge for companies, as they struggle to find ways to manage costs during a time when attracting, retaining and motivating employees is more important than ever."
Teaming Up
Buck's survey reports a slight shift away from individual and discretionary bonus plans to plans that link payouts to business unit, group and team performance. The most prevalent types of incentives are those that combine business unit and group/individual performance (almost 50 percent) and those based just on business unit results (approximately 20 percent).
"Group and team incentives are powerful tools to improve performance," says Larry Reissman, a Buck Consultants principal. "In an uncertain economic climate, incentives linked to key performance indicators enable employers to focus the efforts of their people and help control compensation costs."
Areas of Opportunity
In a challenging economic environment, Mercer advises taking steps to improve:
* Communication. Your workforce is most concerned about what this shakeout will mean to them. Direct, clear and timely communication from senior management will help employees move past paralyzing uncertainty to a point where they can be productive and even motivated to contribute to improved corporate performance. The objective is to reduce the anxiety and uncertainty about your employees' future employment where possible.
* Engagement. Attraction and retention are no longer synonymous with pay. You need to emphasize the total employment value proposition - including training opportunities, career development and workplace flexibility. These are the important levers that will help you retain and engage your workforces in an affordable and sustainable way, positioning your organization for a business upswing.