Cost a key factor in policies during downturn

According to the global survey "Reward in a Downturn" conducted by the human resources (HR) consulting company Hay Group, global trends show four main issues:

1 Downsized HR programmes: Training and development programmes are being scaled back or eliminated by 27 per cent of respondents. Nineteen per cent of participating companies are reducing overtime wages and 30 per cent use contract workers.

2 Changes to short-term incentives: 38 per cent of organisations are making changes to bonus/incentives plans. Sixty-nine per cent of organisations reported that their short-term incentive programmes had paid out less than 70 per cent of targeted levels.

3 Employees concerned about job security: 88 per cent of participating organisations said employees' primary concern is job security; 87 per cent said employees had concerns about salary levels; and 85 per cent said staff was worried about cost of living.

4 Employers concerned about talent management: Employers' primary concern is the ability to retain top talent and employees with critical skills. In addition, employers are concerned about keeping employees' motivation high and engaging them in their work.

Within Asia, many countries are reporting salary freezes, downsizing, and other cost-cutting measures in line with global trends. Although some countries such as still expect payroll budgets to increase - by 5 per cent in the cases of China and Malaysia - this is much lower than the 12 per cent or more the previous year. This is despite the fact that Asian economies are performing better than those in other regions.

"Organisations don't want to take risks because they aren't sure how the economy will be in the future. So whatever they can do, wherever they can cut - they won't wait to do it," said Dr Mana Lohatepanont, managing director for Thailand and regional director for Southeast Asia of Hay Group.

In Thailand, the salary forecast is higher compared to the global average, with a 5 per cent median compared to the global 2.8 per cent. However, this is lower than the initial forecast in November 2008 of 7.5 per cent.  Compared to other Asian countries, Thailand also seems to have a positive trend in the salary budget area: The results show that 52 per cent of organisations are looking to increase salary budgets (versus 36 per cent in Asia overall). High-performing employees in Thailand are receiving 7-per-cent salary increases, slightly higher than the rest.

While many other firms in Asia and around the world are taking the downturn as an opportunity to adjust short-term incentives offered to employees in a bid to save costs or bring staff performance in line with corporate strategy, this trend is unclear in Thailand, according to the report.

"[Worldwide] many organisations have cut their healthcare benefits but on training, there are firms that have both increased and decreased them. An increased focus is on taking care of the high performers. Non-financial allowances including car and travel have not changed. But this depends on the necessity of each organisation: You don't have to follow [the trend]," Mana said.

In terms of staffing levels, compared to the rest of the world and Asia, Thai organisations [47 per cent] are looking at maintaining staffing at budgeted levels, rather than decreasing. This may be explained by the fact that in terms of turnover, Thai executives and professionals rate slightly higher than global trends with more than 21 per cent of Thai organisations experiencing high turnover in these groups.

But one of the top employee concerns in Thailand is job security and layoffs, which are slightly higher than in the rest of Asia. Meanwhile, results indicate that the top concerns of management at Thai organisations are retaining talent with technical skills and maintaining employee engagement. Therefore, the implication for management in retaining employees and keeping them motivate is to focus on reward programs, according to the report.

Mana said it's time for organisations to take a fresh look at their reward practices.

"In some organisations, reward components are managed in isolation of each other. For example, the commission is set by the sales department, some other components by the HR department, and some by the finance unit.  

"Surprisingly, many companies have no reward strategy at all, or they have but just limit it to the HR staff or top management, without making it known to the rest of the staff."

In many cases, the value of total rewards is not understood by employees. Quite often, employees don't see the value of provident funds, to which the companies contributes half the total sum, despite the fact that it will help them a lot in the future, he said.

It is also useful for firms to conduct a survey to get feedback from employees on which rewards they prefer, because quite often the company comes up with reward packages that are not valued by staff, said Mana.

Companies should also understand how to balance cost reduction and impacts on employee relations. For instance, freezing promotions has a relatively small cost-saving impact but affects morale greatly. Meanwhile, lay-offs are easy to implement and offer immediate cost-saving benefits but the impact on employee relations will last a long time, he said.

The Hay Group's report suggests various reward strategies, dividing companies into those whose current focus is on "getting healthy" and those that are healthier and whose focus is on "getting stronger". 

Offering intangible rewards such as staff recognition, meanwhile, is one thing that management in Thailand has often talked about but hardly ever implement, even though it is inexpensive, he said.