Compensation Strategy in a Bad Economy

Essay by AJ056College, UndergraduateA, December 2009

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Synopsis:“Compensation Strategies for a Bad Economy” outlines how in times of economic recession can force an organization to retool their compensation plans in order to save money, minimize cost, and stay competitive. The article discussed about impacts of recession has on compensation particularly on pay increases pertaining to the hiring and retentions of employees. A survey done by WorldatWork, a compensation professionals’ association found that 1,000 companies on average gave a 2.1 percent pay increase in 2009 which was lower than the original 3.9 percent the companies had planned in the recession ridden year. Even though the pay increase was only 2.1 percent, the article suggested that the raise was still significant due to almost zero percent increase in inflation.

The article mentioned Al lee, Ph. D., The Director of Quantitative Analysis at saying how important it was to give employees a raise to recognize their effort and abilities.

The pay raise was an indication to the employees how much their employers valued them and how willing the employers were to keep them even though in a time recession where there are few raises and lots of layoffs. Dr. Lee also mentioned how important it is to compensate appropriately for what they learn on the job on a yearly basis. Companies should keep up with the yearly raises to prevent any top performers from leaving to a company that rewards experience and knowledge.

Lastly, the article addressed some compensation strategies that will allow companies to be fair and competitive when hiring employees during a recession. First strategy is to be aware of the pay gaps between the same jobs when one employee was hired below their worth at the time of employment during recession and another at a time of non-recession. Next is to set the level...