Bosses use pay freeze to save jobs

Freezing pay should not be a long-term strategy for employers, says recruitment firm Michael Page. Photo / NZ Listener

On a pay freeze? You're not alone, according to a survey of senior New Zealand executives.

Research by recruiting company Michael Page International has found 42 per cent of white-collar employers froze salaries in the past six months.

Michael Page New Zealand associate director Pete Macauley said putting salaries on ice was the most common strategy companies used to avoid redundancies.

"Despite the challenging conditions the corporate sector has faced over the last 12 months, our survey shows that most employers have implemented alternative cost-reduction strategies to avoid losing staff."

Asking staff to take paid leave was the second most common way, with 16 per cent of employers using the method to save jobs. Reducing working hours was the third at 9 per cent.

But Macauley did not believe the pay freeze situation could continue for long.

"Organisations need to continue to reward employees, who need to see a return on investment. It's part of retention. We don't believe it should be a long-term sustainable strategy."

Opportunities for employees to move jobs were expected to pick up in the second half of this year and if employees were not seeing an increase in their salaries they could be tempted to move on, Macauley warned.

The research found the job market was stabilising although most employers were still reluctant to increase overall staff numbers.

Almost half (49 per cent) had reduced staff in the past six months but only 26 per cent were planning to make further cuts in the next six months.

"The biggest impact on hiring activity occurred in the second half of 2008 and first quarter of this year. That's when hiring plans were put on hold and jobs were lost. Conditions have stabilised since then."

Macauley said a growing number of employers his company worked with believed that the market had hit bottom.

But only 15 per cent of those surveyed expected job growth over the next six months.

Macauley said it was still too soon to point to a recovery in the white-collar job market.

"A recovery requires new jobs to be created and only 15 per cent of respondents expect headcount growth over the remainder of 2009. Business confidence levels are still too fragile for the majority of companies to invest in new positions."

Although 49 per cent expected business conditions would pick up, 28 per cent were not sure and 26 per cent did not believe there would be any improvement.

The survey also took in salary levels. Macauley said that while some surveys showed salaries were being cut back, he believed they were static.

Although some workers were taking pay cuts to take lower positions, those positions were maintaining the same pay level.

Macauley said some employers were cautious about taking on people who were overqualified for a position as they believed that once the market picked up those employees would leave for a better role in six to nine months.

The number of people looking for work had remained consistent over the past year as those in work stopped looking and those out of work made up the numbers.

Macauley said employers had a preference for performers with a demonstrated track record and the current market meant it was "somewhat more challenging" to screen out the performers from those who had been made redundant for poor productivity.

The survey interviewed 150 senior managers.

Statistics New Zealand figures on how many people are out of work and changes to salary and wage levels are due out today.

AVOIDING THE AXE

Main strategies used to avoid job cuts:

* Salary freeze - 42 per cent
* Nothing - 19 per cent
* Forced paid leave - 16 per cent
* Reduced working hours - 9 per cent
* Reduced office rental - 6 per cent
* Salary reductions - 4 per cent
* Forced unpaid leave - 2 per cent
* Other - 2 per cent