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Middle East organizations focus on pay differentiation in response to economic crisis

United Arab Emirates: Tuesday, June 09 - 2009 @ 15:48

A survey of participants at a recent Watson Wyatt Middle East seminar found that most organizations have already implemented cost cutting ‘quick wins’, such as reduced international travel budgets (69%), recruitment freezes (56%) and reduced salary and bonus budgets (52%).

Other plans include altering overall HR strategy (69%), improving HR focus on internal customers (56%) and reducing the HR department budget (52%).

The new focus is on differentiation in pay – with 44% of organizations looking to introduce greater differentiation in pay schemes to retain and motivate key employees.

“At the end of 2008, organizations were reducing their costs by laying off staff and delaying the roll out of HR programs and initiatives. However, now a key focus area for organizations is to maximize what small pay budgets or bonuses they have so that any increases or bonuses are directed towards top performers. While average bonus payouts will have decreased, higher performers may receive a proportionately higher award.”

said Billy Turriff, a senior consultant at Watson Wyatt Middle East.

“Organizations are now also starting to plan what they will need their employees to do differently when the recovery starts and also what initiatives they need to put in place currently, to ensure that employees remain engaged and motivated in what are still difficult and uncertain times.”

All organizations surveyed had issued an immediate communication to their employees in response to the economic conditions and the potential impact on business. However, there was a split between those that had increased their level of internal communication (44%) and those that had done nothing different (54%).

The survey, which including 98 organisations from across the region, found less than 60% of participants’ internal communication focus on tactical areas such as training and development or the non-tangible elements of total reward.

According to Watson Wyatt, it is important in a downturn to take the emphasis away from compensation, and refocus on other elements of an employee’s reward package or experience at work. This is why the Employee Value Proposition (EVP) is a growing area of focus for a number of organizations. It helps take the pressure off monetary reward, and when communicated through a strong employer brand can facilitate engaging communication at the tactical level which subliminally reinforces EVP messages.

“Our survey shows that responses to the financial crisis by HR in the Middle East can be broadly split into two phases,” said Billy Turriff. “The quick wins implemented at the end of 2008 are now being complemented by a greater focus on rewarding key talent and developing new people initiatives in order to retain and motivate employees them in readiness for a recovery in the financial climate’.

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Tuesday, June 9- 2009 @ 15:48 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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