Aligning Pay and Performance

Employees in the telecoms, media and technology sector can expect only modest pay rises over the next 12 months, according to a new report by accountancy and business advisory firm, BDO LLP.
‘Aligning pay and performance in TMT companies’ reveals that 74% of businesses in the sector were planning to increase average employee pay by less than 3%. Around 14% of employers were not expecting to raise average wages at all.

Against this backdrop, 36% of bosses reported that managing employee salary expectations at a time when company performance does not justify meaningful increases was the single largest challenge in the area of remuneration. At the same time, 28% of respondents recognised the difficulty in attracting and retaining the best staff.

The report’s authors conclude that aligning pay more closely to company and individual performance is the most effective way of overcoming this complex set of challenges. There is considerable potential for the sector to improve in this regard – for example, 60% of companies that failed to reach their profit targets reported that they still paid staff bonuses in the past year.

Julian Frost, head of TMT at BDO LLP, said: “The difficult operating environment facing the TMT sector poses numerous challenges, not least in the area of remuneration. Budgets remain tight, and the vast majority of employees will encounter wage cuts in real terms [i.e. when adjusted for inflation] over the coming year.

“Companies are having to walk a very narrow tightrope as they attempt to retain their best staff while, at the same time, dampening down salary expectations that exceed bottom line performance. As a result, it is more important than ever for businesses to ensure that pay is closely aligned to company and personal performance. The sector needs to find ways to ensure that the people who perform to the highest levels are fairly and appropriately rewarded for their achievements. This does not necessarily mean increasing the overall salary and wage bill, but rather finding ways to channel available resources to the highest performers.

“The survey suggests that the TMT sector still has considerable scope to improve in this area. Businesses would be well advised to take a look again at their employee reward schemes to see where they can build greater long term alignment between shareholders, management and staff.”

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David Dungay

Editor - Comms Business Magazine
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