Tom Broughton, editor
So just how should you manage the remuneration expectations of your team? The blanket TV coverage of doom and gloom from the financial crisis may help ease that difficult conversation, but a statement from Aon last week paints a perfect picture of the landscape. It read: “Many companies are looking at ways of reducing their fixed costs, examples being pay freezes, reduced hours, four day weeks and enforced sabbaticals on greatly reduced levels of pay.” So, in short, count yourself lucky you still have a job.
The Aon statement was in fact in response to its planned overhaul of its employee pension scheme as fixed costs begin to take centre stage.
Employee pension contribution levels will be cut but matched by Aon. The rationale is that it will reward those willing to invest in their old age. But you can’t help seeing a substantial long-term saving in a decision that is unlikely to be reversed once the good times return. And if you hadn’t realised it already, from 2012 all employers will need to automatically enrol staff into a pension scheme, so it is better to prepare for the parity to save money when the new legislation takes effect.
The trend is likely to be followed across businesses too, however unpopular. And what better time to deliver that bitter pill than when the financial services sector is consumed by a constant flow of bad news and turmoil? A measure of the climate is presented on pages 16-17. You’ll see that executive pay is in freefall and the days when bonus payments supplemented the next exotic holiday or winter ski trip are all but a distant memory. What’s more, it’s likely to be worse next year as the impact of the downturn trickles through the trading and remuneration cycle.
But the impact of pension contributions is what’s really capturing the headlines and providing a simple and effective place to start improving the bottom line once everything else has been stripped out. Structural change it may be, but now is the perfect time to view who is being pragmatic and looking for a quick return, deploying short-term tactics and who is preparing for a sustainable future.