PECS Update: September in review

JSE listed companies salary survey
7th Aug 2018
MAINTENANCE MANAGEMENT
16th Nov 2018
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September was an interesting month for HR. Following an announcement by Stats SA on 4th September that the GDP has decreased by 0.7% in the second quarter (following the 2.2% drop in the first quarter), South Africa was in a technical recession.

Conservative times

Following the announcement of a technical recession and with elections looming, there’s uncertainty in business leadership. In times like these, companies will tend to go conservative to maintain escalating payroll costs.

How will this impact human resources?

  • The Salary & wage bill is a significant expense in many organisations and therefore they will look at ways to manage rewards more effectively. Those with a more formalised reward management system and a clear strategy will weather the storm because steps have been put in place to manage reward within defined pay scales which makes it much easier to contain escalating payroll costs.
  • Salary increases will tend be lower and some companies may even implement salary freezes. This will result in a bigger emphasis being placed on performance-related pay (particularly executive pay given that must stand up to the scrutiny of all stakeholders). This will require alignment between company performance and executive incentives.
  • We expect to see more organisations restructuring in order to become more efficient. This is twofold:
    • There is a retention risk because if organisations start retrenching, employees become uncertain (and it’ll be the high flyers who move). Organisations need to ensure they are pro-active in addressing the retention risk. Retention schemes will become vital.
    • Restructuring could lead to removing layers in the organisation and employees appointed to positions without the necessary skills to thrive, especially in leadership roles. Organisations typically cut the training budgets in difficult economic times thus must spend what they have left on training that will add value. PECS surveyed organisation’s priorities for training in an economic downturn and they indicated the need for Leadership Development and Sales Effectiveness. We recommend organisations spend training budgets effectively.

P E Corporate specialises in remuneration advisory services, leadership development and sales effectiveness training, salary surveys and remuneration benchmarking, and all aspects of reward management.

PECS wish you a wonderful festive season and prosperous 2019.
Please note our offices will be closed from 24th December 2018 until 3rd January 2019.