Employers dump pay rises and cut working hours as recession bites

A new survey has revealed employers are doing everything possible to avoid job losses, including freezing wages, forcing workers to take holidays, and reducing working hours.

The survey of 152 businesses (with turnover between $10 million and $200 million) reveals that 81% of respondents intend to keep salaries flat for the next six months, while 58% are asking their employees to take leave and 38% are offering reduced work hours.

Graeme Matthews, national managing partner of KMPG’s middle market advisory division, says companies are caught between two problems; the need to trim labour costs to improve cashflow, and the need to retain skilled workers.

“I think the important thing in these times is to carefully review your immediate workforce needs but to keep in mind your medium to long-term needs, to be ready to bounce back when the recovery does start.”

While the willingness to suspend pay rises and cutting hours shows companies are trying to protect jobs, Matthews says the outlook for employment is bleak – while 54% of respondents intend to maintain their current staff levels, a third are planning to employ less people.

One glimmer of hope in the survey was seen in respondents’ outlook for the economy: 64% of businesses surveyed believe the economy will continue to contract in the next six to 12 months, a fall of 14% as compared with the KPMG’s December 2008 survey.

While other SME surveys have reported that companies are keen to examine acquisition and growth opportunities during the downturn, Matthews says most businesses are bunkering down.

“I guess businesses are still looking for opportunities, but the key issue is dealing with their own issues within their existing business. They are concentrating very much on that.”

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