Special Update of salary budget survey October Canada. A Research brief by worldatwork

Transcription

1 Special Update of salary budget survey October 2001 Canada A Research brief by worldatwork

2 About This Survey In late 2001, it seems like nearly every day that the media is reporting about another company experiencing layoffs or reducing their earnings projections. Indeed, the economy has been sliding for most of the year, and companies are feeling the effects. The terrorist attacks in the U.S. on Sept. 11 seemed to intensify the North American economic downturn and put more cost-cutting pressure on already hurting companies. In this context, several questions have arisen: Are companies turning to their salary budgets to try to cut costs? How many companies are dealing with layoffs, and are the layoffs finished or have they only begun? Are companies considering taking the ax to existing salaries for more savings? These questions and others prompted by the events of Sept. 11 caused WorldatWork to revisit the data collected in May 2001 for its annual Total Salary Budget Survey to determine if companies are rethinking their projections for salary budgets for Respondents to the original survey in May 2001 were re-surveyed in October 2001 to gauge whether base salary budget projections and variable pay programs had increased, decreased or stayed the same in the latter months of A total of 2,571 respondents to the May survey (U.S. and Canadian) received the special October survey. Of this group, 1,023 replied for a response rate of 37 percent. This sizeable sample and strong response rate provides confidence in this data relative to the WorldatWork membership, however, the results here do not necessarily reflect the U.S. and Canadian economies as a whole. WorldatWork members, and thus these survey respondents, tend to reflect the actions and activities of firms with more than 500 employees. About WorldatWork WorldatWork (formerly the American Compensation Association and Canadian Compensation Association) is a global not-for-profit association of more than 26,000 professionals working in the fields of compensation, benefits and total rewards. Founded in 1955, WorldatWork is dedicated to knowledge leadership in compensation, benefits and total rewards, and all of the disciplines associated with attracting, retaining and motivating employees. In addition to membership, WorldatWork offers total rewards professionals a variety of highly acclaimed certification and education programs, the award-winning monthly magazine workspan, online information resources, conferences, research and networking opportunities. NOTICE OF PROPRIETARY RIGHTS This data collection is a proprietary initiative of WorldatWork and is protected by U.S. copyright law. The data is licensed for use by participants and purchasers solely for their own use and not for resale or redistribution. No part of the contents of this report may be reproduced, excerpted or redistributed in any form without express written permission of WorldatWork and appropriate attribution. Research Brief by WorldatWork Staff: Ryan Johnson, Kay Schmitke, Lane Johnson, and Jeremy Handel Design by: Stacey Miller 2001 WorldatWork. 1

3 Changes in Salary Budget Projections The media has well documented how the downward-trending economy, exacerbated by the tragic events of Sept. 11 in the United States, has caused companies to both consider and implement a variety of cost-cutting measures, including layoffs and service reductions. However, according to data collected by WorldatWork in October 2001, not many Canadian companies seem to be looking toward their merit programs and base salary plans for savings in this slumping economy. In fact, only 26% of respondents (respondents who both completed the Total Salary Budget Survey conducted in May of this year and the follow-up survey in October) indicated that they anticipated changes in their 2002 base salary budget plans. Almost half (46%) said they do not anticipate changes. A sizeable 28% almost one out of three reported that uncertainty prevented them from answering accurately at this time (table 1.1). Table 1.1: Do you anticipate changes in your base salary budget plans or estimates for 2002? (All Canadian respondents) Yes 26% No 46% Cannot answer at this time 28% Although about 26% indicated they are anticipating changes to base salary budget plans across all job classifications, when job classifications are broken out, a slightly different picture is revealed. It would appear that, for the most part, the changes are coming at the higher end of the spectrum; namely with the management salaried and officer/executive levels. Table1.2: Does this reflect a change from your May 2001 projection? (by job classification; all Canadian respondents) Nonmanagement Hourly Nonunion 19% 81% Nonmanagement Salaried 27% 73% Management Salaried 30% 70% Officer/Executive 32% 68% Average 27% 73% Yes No Although the vast majority of salary budget adjustments in the weeks and months surrounding Sept. 11 were decreases, there have been some increases. About 10% of changes across all job classifications have been to increase budgets. Despite several high-profile cases of executives reducing their pay, this group actually averaged highest on the question of increases. Table 1.3: If yes, is this an increase or a decrease? (by job classification; all Canadian respondents) Decrease Nonmanagement Hourly Nonunion 10% 90% Nonmanagement Salaried 6% 94% Management Salaried 10% 90% Officer/Executive 14% 86% Average 10% 90% 2

4 Downturn and layoffs According to the follow-up salary budget survey, a majority of the Canadian companies represented by WorldatWork members are feeling the economic downturn. Fifty-six percent reported a downturn in revenues in the six months prior to October 2001, and 36% believe they saw an increase in the downturn between Sept. 11 and mid-october. Table 2.1: Has your company shown a downturn in revenues in the past 6 months? (all Canadian respondents) Yes 56% No 44% Table 2.2: Has the crisis of September 11, 2001 increased the downturn? (all Canadian respondents) Yes 36% No 64% Half of responding companies (50%) indicated that their industry has experienced layoffs during the previous 12 months, with the majority of layoffs coming in their industry during the Oct March 2001 time frame (table 2.3). The individual companies, however, appear to be lagging behind their industries in terms of layoffs. Table 2.4 shows that while a total of 41% of individual companies reported layoffs during the entire twelve-month period ending in October 2001, only about 10% of respondents had layoffs during the October 2000-March 2001 time frame. Only about 6% reported layoffs in the weeks following the Sept. 11 tragedy. Table 2.3: Has your industry had layoffs in the past (all Canadian respondents) 12 months 30% 6 months 16% Since September 11 4% We have had no layoffs 49% Table 2.4: Has your company had layoffs in the past (all Canadian respondents) 12 months 10% 6 months 25% Since September 11 6% We have had no layoffs 59% When asked about the prospect of future layoffs, nearly one-third of companies (32%) were undecided on whether they will need to terminate workers in the six months following October 2001, while 14% said they were, in fact, anticipating layoffs (table 2.5). Table 2.5: Is your company forecasting future layoffs in the next 6 months? (all Canadian respondents) Yes 14% No 54% Too soon to tell 32% 3

5 May 2001 vs. October 2001: Changes to 2002 Base Salary Estimates As of mid-october, the economic decline combined with the Sept. 11 tragedies in the U.S. and what followed in the aftermath appears to have caused many companies to re-evaluate their base salary estimates for A number of sizeable changes are now evident between the May 2001 projections and the data collected in October The following three tables present the original May 2001 data and the October 2001 data in a variety of ways for comparison. For purposes of establishing a 2001 baseline, table 3.1 presents the original data submitted by all Canadian respondents in May, Table 3.1: May 2001 Data Regarding 2002 Projected s (All Canadian respondents; n=206) All respondents to Total Salary Budget Survey (May 2001) Data Group General / COLA Merit Other Total Nonmanagement Hourly Nonunion May Nonmanagement Salaried May Management Salaried May Officers/Executives May Table 3.2 (on page 5) provides a May/October comparison for the group of respondents who completed both surveys and includes both those who indicated in the October survey that they anticipate changes and those who indicated no anticipated changes to their 2002 base salary budget plans. (Note: in calculating these figures, the original May survey responses were used for those respondents who answered no anticipated changes in the October survey.) The reader should understand that the small number of respondents to this question reduces the reliability of the data. 4

6 May 2001 vs. October 2001: Changes to 2002 Base Salary Estimates Table 3.2: May vs. October Comparison (All Canadian respondents who completed both May and October surveys, and indicated either no change or anticipated change for 2002; n=47). Projected s for all respondents to Follow-up Total Salary Budget Survey (Oct. 2001) Data Group General / COLA Merit Other Total Nonmanagement Hourly Nonunion May % 3.6% 3.5% Oct % 3.2% 3.1% Nonmanagement Salaried May % 3.4% 0.8% 3.9% Oct % 2.9% 0.8% 3.4% Management Salaried May % 3.6% 0.9% 3.9% Oct % 3.1% 0.9% 3.5% Officers/Executives May % 4.1% 0.8% 4.6% Oct % 3.5% 0.8% 3.9% The May/October decreases seen in table 3.2 range between a low of 0.4% (management salaried/merit increase) to a high of 0.8% (both nonmanagement salaried/general increase and officer/executive/general increase). On a total basis, however, the officer/executive job classification seems to have been hit the hardest at 0.7%. Table 3.3 compares responses for the small group of respondents (n=18) who met two criteria: 1) completion of both May and October surveys and, 2) indication in the October survey that they anticipate changes in their 2002 base salary budget plans. Thus, the following table excludes those who indicated in October that they did not anticipate any change in The reader should understand that the very small number of respondents to this question reduces the reliability of the data. Table 3.3: May vs. October Comparison (All Canadian respondents who completed both May and October surveys and indicated anticipated change; n=18) Projected s for those indicating a change Data Group General / COLA Merit Other Total Nonmanagement Hourly Nonunion May % 3.7% 4.1% Oct % 2.5% 3.2% Nonmanagement Salaried May % 3.8% 4.2% Oct % 2.3% 2.4% Management Salaried May % 3.7% 4.2% Oct % 2.3% 2.7% Officers/Executives May % 4.2% 5.0% Oct % 2.3% 2.8% 5

7 Percent of Employees Receiving a Base Salary Canadian respondents to the May 2001 survey reported that, across all job categories, an average of 94.6% of employees would be receiving a base salary increase. In the October post-crisis survey, however, almost a 10% decrease was registered. Table 4.1: May vs. October Comparison. What percentage of your employees will be receiving a base salary increase in 2002? (All Canadian respondents) May October Average Across All Job Categories 94.6% 84.9% Table 4.2: What percentage of your employees will be receiving a base salary increase in 2002? (All Canadian respondents) Follow-up Survey respondents percent of employees receiving a base salary increase Mean Median Max Min Nonmanagement Hourly Nonunion 87.8% 100.0% 100.0% 0.0% Nonmanagement Salaried 88.1% 98.3% 100.0% 0.0% Management Salaried 84.6% 98.0% 100.0% 0.0% Officers/Executive 79.0% 100.0% 100.0% 0.0% Average 84.9% 99.1% 100.0% 0.0% Confirming the data in tables 3.2 and 3.3, table 4.2 again shows that the officer/executive job classification is being hardest hit during the current economic slowdown, although about 4 out of 5 are still going to receive a base salary increase in

8 Base Pay Cuts As demonstrated above, companies appeared in mid-october to be disinclined to reduce pay raises. Similarly, the data below seems to show that they are also not looking to reduce current salaries through pay cuts except at the executive level. Of the more than 80 Canadian survey participants in October, 96% have not implemented any base pay salary cuts (table 5.1). Of the 4% who have implemented pay cuts, the cuts ranged from 3.5% for nonmanagement nonunion hourly to 10.9% for officers and executives (table 5.2). Table 5.1: Have base salary cuts been implemented since original projections in May 2001 (May-October 2001; all Canadian respondents) Yes 4% No 96% Table 5.2: If yes, what percent of base pay salary has been cut? (all Canadian respondents) All respondents to Follow-up Total Salary Budget Survey (Oct. 2001) Nonmanagement Hourly Nonunion Nonmanagement Salaried Management Salaried Officer/Executive Mean Median Max Min 7

9 Survey results variable Pay Variable pay budgets appear to be an area where employers are looking to achieve cost cutting, as all job categories show a decrease in the October survey. In addition, the projected variable pay budgets for 2002 continue this apparent trend downward. Variable pay is the amount established by management as a percent of payroll to be granted for performancebased, lump-sum cash awards during the year. Included in this calculation are individual incentive awards, special recognition awards, group/team awards, and organisation-wide awards. Excluded are any awards intended only for officer/executive-level employees. Table 6.1 demonstrates the difficulty of attempting to identify trends in the variable pay data. During 2000, awarded variable pay amounts were lower than budgeted amounts for all employee categories. This trend held true in 2001, with the exception of nonmanagement salaried employees, who received a higher amount than budgeted. For 2002, budgeted amounts continue to drop, but many in the profession see variable pay as an important part of the compensation package in order to retain key talent during hard times. Table 6.1: Variable Pay Budgeted/Awarded Trends (all Canadian respondents) All respondents to Follow-up Total Salary Budget Survey (Oct. 2001) Nonmanagement Hourly Nonunion 6.0% 5.1% 4.3% 2.3% 0.0% Nonmanagement Salaried 7.3% 6.8% 3.9% 4.1% 3.8% Management Salaried 13.5% 13.0% 4.6% 4.4% 3.5% Officer/Executive N/A N/A 7.6% 9.5% 7.8% 2000 Budgeted 2000 Awarded 2001 Budgeted 2001 Awarded 2002 Budgeted Projection 8

10 Conclusion Despite a downward trending economy, which has reduced revenue and forced many companies into layoffs, most Canadian organisations appear to be sticking to their original pay raise projections for Only 26% reported in October that they are anticipating changes to their 2002 base salary budget plans, although a sizeable 28% indicated that they were not yet able to answer the question. While more than half of the companies in the WorldatWork October 2001 survey reported letting some employees go during the year prior, and more than a third believed that the economic downturn had worsened since Sept. 11, only 14% are forecasting layoffs in the six months following October Again, however, a sizeable 32% indicated that it is too soon to tell whether they will need to resort to layoffs in the relatively near future. To make up necessary savings, it seems that companies are turning to sources other than salary budgets. Very few companies (4%) report cutting current base pay salary levels to reduce spending, and a very small number report reductions in the number of employees slated to receive a pay raise in the coming year. Variable pay at least according to budgeted amounts appears to be the avenue, related to employee pay, that companies see an opportunity to cut costs. Although shifting more employees to performance-based variable pay type systems would seem to be a strategy to help control costs going forward, it appears that more companies are looking at reducing variable pay budgets. In summary, the Canadian-based companies represented in WorldatWork s membership appear to be standing by their pay raise projections from early 2001 further supporting the notion that, despite even the significant uncertainty of war and economic downturn, companies understand the value of human capital as an asset. 9

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