Managing Compensation Costs
We are fielding quite a few requests for ideas on how to effectively manage compensation costs in light of the rough economic conditions. Below we’ve listed a few ideas we feel have merit and, in some cases, are a more strategic approach than simply cutting jobs. Feel free to comment or provide alternatives you’ve seen work.
1. Freeze Merit Increase Budgets - This translates to no base salary increases for 2009. Most surveys indicate companies have already revised their 2009 merit increase budgets downward from 3.6% to 2 - 3%. Some companies are taking this step further and freezing salaries altogether.
Presidio Pay’s Thoughts - Freezing salary increases is only slightly less demoralizing than a layoff, particularly for high-performing employees. We would suggest companies continue to provide some base salary increase to the top performers in the organization. This reinforces the importance of a
Week of January 12th
What's News is a regularly updated summary of news stories, typically related to compensation, that we are following, find interesting, or find baffling.
Week of January 12th…
- Robert Frank, a Cornell economist, discusses the possible unintended consequences of limiting executive compensation, something that is receiving increasing attention from shareholder activists and politicians. Limiting fixed executive compensation costs (i.e. base salaries) to a multiple of the broader employee population's base salaries has shown merit. However, the components of pay that link to performance should not be capped. We strongly believe all employees should be rewarded for creating shareholder value through meeting their performance objectives. And conversely, should not be rewarded when performance criteria are not met.
