With Labor Day approaching and summer winding down, now is a good time to look ahead and map out your business strategies for the next calendar year. As you’re doing this, FlashPoint encourages you to review your compensation program. You need to assess your business conditions, figure out how much money (if any) you have for salary increases and incentive programs, and develop a budget. The end goal is to offer a total rewards package that is competitive and promotes employee satisfaction and loyalty.

When you’re looking at your compensation, it’s helpful to know what’s going on in the market so you can offer raises and bonuses that are in line with organizations similar to yours. Your situation will be unique, given your industry, your size, your location, and other factors, but below we present some general trends that will help you in your considerations.

In the March issue of eFlash we talked about how the recession was impacting compensation for 2009. We found that many companies (upwards of 30 percent) froze salaries and that more than a third of organizations planned to reduce their pay budgets. A WorldatWork survey issued early in the year estimated that the average merit increase for the year would fall between 2.5 and 3.0 percent.

Though many experts are suggesting that the economy is stabilizing, data released this summer indicates that many organizations are still struggling and will continue to do so for several months:

• According to a May 2009 Mercer survey (titled “Leading through Unprecedented Times”), 51 percent of survey respondents froze salaries at 2008 pay levels for select employee groups, and 32 percent froze pay for the entire organization.
• In that same survey, 86 percent of U.S. respondents said that it is “somewhat or very likely they will experience reduced business and financial performance in 2009.” Given similar trends worldwide, two-thirds of global survey respondents cut their workforce during the first six months of the recession, and 58 percent are planning to make some cuts during the remainder of 2009.
• A recent Duke University/CFO Magazine “Global Business Outlook” survey (published in the July/August 2009 issue of CFO), indicates that respondents “expect to reduce their workforces by 6% in the next 12 months, which could send unemployment as high as 12%.”

As we reported in the March eFlash, variable pay programs are also affected by the downturn. Because of fewer resources, organizations are reassessing how they administer variable pay. Many more are starting to tie incentive plans to specific company objectives, scrapping the idea that all employees should get bonuses, and focusing instead on providing rewards to the top performers who demonstrate results.

No matter how well your own organization is faring, you’re impacted by the larger economic environment, and you need to respond with a creative and strategic compensation plan. Given the findings outlined above, FlashPoint recommends that you build into your program:

• Tools such as training opportunities and mentoring programs that promote long-term employee engagement and loyalty
• Incentive plans that tie to specific company goals and that reward employees based on performance
• A process that identifies the roles most important to the organization’s success and growth, accompanied by greater bonus opportunities to attract and retain these key positions

Even with limited resources you can build a program that is affordable, is competitive, promotes efficiencies, and supports your organization’s strategic growth. With only four months to go until 2010 rolls in, now is a good time to get started.

FlashPoint’s consultants have experience conducting compensation research, benchmarking positions, and building and maintaining salary structures. We have tools to help you identify your organization’s strategic positions, and we can help structure a creative program to reward top performers. For more information about our compensation services, contact us or visit the compensation page on our website.