"Bailouts, Layoffs & Stimulus Packages" Employee Compensation in an Economic Downturn

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If you've watched or read business news in the last six months, you might get the impression that no one has a job anymore. However, this perception is simply not true. An overwhelming number of Americans are still employed. Therefore, there is still a great need for companies to implement good compensation strategies to help keep their current workforce focused and engaged.

If you've watched or read business news in the last six months, you might get the impression that no one has a job anymore. However, this perception is simply not true. Overwhelming number of Americans are still employed. Therefore, there is still a great need for companies to implement good compensation strategies to help keep their current workforce focused and engaged.

When the headlines are dominated by bailouts, layoffs and stimulus packages, it's very easy for employers to take the "you're lucky you have a job" approach towards employees. And yes, companies can forgo salary increases, cancel bonuses, cut benefits and/or layoff employees and those actions could all be valid for the survival of the business. However, these approaches should be considered as a last resort because they could have long term adverse effects on your most valued employees. Martha Glantz, a senior director at Total Compensation Solutions, has been involved in several significant downsizings for major corporations and she has seen the fallout from these actions. "They might stay through the hard times but you have also given them reasons to be resentful and/or to start looking elsewhere," says Glantz.

In a time of economic downturns, it is imperative that companies retain their most productive and valuable employees. Because even when the economy is sluggish, organizations still need to continue operations, maintain business relationships, provide good products and services and find new avenues of business. These goals cannot be accomplished unless you have your best people in place.

So what are good compensation strategies during down times? Companies need to answer these questions:

1.    Do we have a strategy to attract, retain, and motivate our employees? Are we losing talent or not getting talent that we need?
2.    To what degree does our compensation philosophy help us to achieve our objectives?
3.    Do we have the tools in place to recognize and reward our top performers?
4.    Do we regularly survey the market to assess the competitive level of our compensation programs?
5.    Do we communicate to our employees the value (in dollars) their total rewards package (cash compensation, retirement benefits, health benefits etc.)?

These questions are designed to help companies think of compensation as more than a cost of doing business. Compensation as part of a total rewards strategy can facilitate employees who are engaged with the business which in turn leads to better performance and business results.

If your company feels the need to implement more dramatic approaches such as downsizing, wage freezes, lower or no bonuses, a third party can help you to think through the alternatives. For any change, communication is the key for the employees who remain with the company. If they understand the reasons behind the decisions being made, you may keep these employees motivated and engaged at least for the short-term.

Please call Tom Bailey at Total Compensation Solutions at 914-730-7300 to learn more about good compensation strategy or assistance with any of your compensation issues.

Tom Bailey is a compensation consultant at Total Compensation Solutions (TCS). TCS is a full-service compensation consulting firm specializing in Executive compensation, Board-based compensation, Non-profit compensation, Board of Directors Compensation & Governance, Deferred Compensation, Bonus/Incentive Plan Design and Review, Severance Planning and Custom Salary Surveys. TCS has offices in Armonk, NY, Philadelphia & Los Angeles. For more information call 914-730-7300 or visit us at http://www.Total-comp.com.

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