Many of my clients are asking me how they can retain and reward high performing staff whilst remaining financially secure. Businesses need to look carefully at their plans to financially reward employees in 2009.
There are a number of popular options being discussed at many boardroom tables around the country at the moment, and I have been involved in the development and execution of a number of creative approaches which I have outlined below:
Below are my top 5 strategies for remuneration during a recession.
1. Freeze: Opt to freeze current employee salary packages for a period of 6-12 months as a means of controlling expenses. Be careful not to ‘guarantee’ future salary increases after the freeze period unless you are certain you can deliver on this promise.
2. Selective Increase: Provide your top performers or top 10 percent of your workforce with a standard increase, but exclude the balance of your workforce. This strategy is best when you have key talent within the business that you cannot afford to lose and you are confident your management team can execute this strategy.
3. Salary downsizing: Apply a percentage decrease to base salaries from the top down. The range is about 10 percent – 20 percent reduction in the base salaries of all employees or a select group. These salary cuts can either be permanent, open ended or temporary.
4. Modify existing remuneration arrangements: Change or remove one or more components of the salary package, for example remove or reduce car allowance or mobile phones or agree to defer payments such as KPI bonuses. Organisations can also offer an interest rate to deferred bonus amounts to ensure there is no disadvantage to the employee in the long run.
5. Alternative benefits strategy: Consider offering alternative benefits in lieu of traditional base salary increases. These non-financial rewards can be in the form of increased annual leave, stock options, professional learning and development or more flexible work arrangements.
What creative remuneration strategies are you considering to retain talent and profits in the current market?