A new study, conducted by global management consultancy Hay Group, which spanned 1,003 companies in 80 countries, revealed that more than 30% of companies are freezing or considering freezing base salaries as a direct result of recent economic events.

Top line findings reveal that:

• Nearly one third of organisations are freezing, or considering freezing, base salaries as a direct result of recent economic events.

• One fifth of companies plan to freeze or reduce headcount in the near future.

• 16% of companies expect business results to fall significantly short of budgeted projections.
 
While a majority of companies have not fully felt the impact of current economic events, 16% expect business results to be significantly worse than budgeted levels. “Even more alarmingly, globally 15% of organisations reported that they were freezing salaries for all employees,” says Colin Evans, director at Hay Group and one of the leaders of the study. “Short of layoffs or salary cuts, this is as serious as you can get in terms of sending out distress signals."

In addition, the study found that 20% of organisations would be freezing or decreasing staffing levels in the near future. 
 
Yet when companies were asked about their primary concerns regarding engaging and retaining key employees during challenging economic periods, they identified retaining and motivating key contributors as their number one concern. 38% of companies indicated that they have either made changes or are making changes to their high performer retention programs.

“An analysis of the forecast for next quarter, coupled with the impact of this report, could be the catalyst for much more serious economic measures,” says Evans.

Other notable findings include:
 
• Employer-provided benefits are being put under the microscope, especially healthcare: 27% report they have either made changes or are making changes to healthcare benefits.

• 21% of respondents indicated that they either have changes implemented or planned for retirement/pension benefits.
 
• 38% of respondents indicated that they have changes implemented or planned for training and development programs.
 
EMEA picture

Overall, companies in the EMEA regions were more upbeat about business results:
 
• Only 10% of businesses in Western Europe expected business results to be significantly worse than budgeted. 
 
• Africa and the Middle East were far more positive (with 7%), and Eastern Europe have the most optimistic outlook this year with only 3% saying that results would be worse than expected.

• In the current climate, companies within EMEA countries have been looking closely at salaries. 34% of companies in Western Europe, 32% in Eastern Europe and 36% in the Middle East say that they are freezing or considering freezing basic salaries.

• The effect on benefits of recent economic events can also be seen. In Western Europe, 16% have or are planning to change healthcare benefits, and 28% have or are planning changes to retirement / pension benefits. In Eastern Europe these figures are 15% for both healthcare and pensions. 
 
• By far the biggest change is in Africa and the Middle East, where 48% have or are planning changes to healthcare benefits, and 28% are or are planning to make changes to retirement/pension benefits due to recent economic events.