Watson Wyatt’s 2002 Strategic Rewards survey found that most companies cut salary increase budgets, slashed jobs or put hiring moratoriums in place in an effort to survive the downturn.
According to the survey, more than eight out of ten (82%) of the companies surveyed implemented at least one of the following cost reduction measures during 2002:
- Reduced staff, 53%
- Reduced salary increase budgets, 46%
- Froze/greatly reduced hiring, 46%
- Increased employee contributions for benefits, 38%
- Eliminated/severely cut bonuses, 21%. However, m erit increase budgets are expected to rebound to 3.8 % in 2003 from 3.4 % in 2002, according to the study.
Top-performing employees, meanwhile, cited dissatisfaction with pay as the number one reason they leave their companies, followed by dissatisfaction with management, and lack of promotion opportunities.
If their company faced financial difficulties and needed to cut costs, only 2% of top-performing employees said companies should first cut their benefits or reduce their salaries/bonuses, while 47% would prefer to lose their stock-based rewards first.
Other key findings from the study include:
- Companies continue to have difficulty attracting and retaining critical skill employees – particularly in health care — although the challenge is not as great now as it has been for the past two years. Some 45% of companies said it is difficult to attract critical skill employees; 26% say they have trouble retaining them.
- Customized rewards are linked to improved financial performance.
- When it comes to monetary rewards, top performers place the highest value on annual bonuses, stock grants and project incentives. The most valuable non-monetary rewards, according to high performers, are flexible schedules, advancement opportunities, and work-at-home arrangements .
The Watson Wyatt survey covered 431 companies and 3,000 top-performing employees.