Most Irish firms cut payroll by 11% - survey

SEVENTY PER cent of companies in Ireland reduced payroll by an average of 11 per cent in 2009, but the vast majority did not cut salaries, a new survey by Mercer has found.

More than 100 companies from the multinational and large corporate sector were interviewed for the study, which looked at cost-managing measures undertaken by companies in 2009.

The survey found that most companies used measures other than salary cuts to achieve a reduction in payroll.

These included: hiring freezes; compulsory or voluntary redundancies; reduction in overtime; and reductions in incentive payments.

The gradual phasing out of defined benefit retirement plans – particularly the closing off of the plan to future members – also helped to reduce costs.

The survey found that only 9 per cent of companies cut salary rates last year, while 12 per cent implemented unpaid leave as a cost-cutting measure. According to Patrick Robertson, senior consultant with Mercer, salary cuts were the exception rather than the rule during 2009.

“The survey shows that companies are seeking to reduce the cost of doing business, but cuts in pay rates are the exception in the larger organisations” Mr Robertson said.

However, the study found that approximately one-third of organisations have implemented salary freezes in 2008 and 2009, and more than half plan to freeze salaries in 2010. Senior executives are most likely to be the subject of pay freezes.

Separately, a survey by recruitment firm Hays has found that salary levels for advertised new positions fell by up to 30 per cent in 2009.

The company examined the salaries, terms and conditions for jobs advertised by the company in 2009 across seven separate industries. Unsurprisingly, the construction sector saw the biggest drop in salary, with salaries for new positions down 30 per cent on the previous year.

Those applying for jobs in accountancy and finance also saw a significant drop in the level of pay offered. Salaries for new positions were down by 10 – 20 per cent in 2009, compared to an increase of approximately 4 – 5 per cent in 2008.

People already working in the sector were hit by pay cuts as well as the elimination of bonuses, shortened hours, reduced pension contributions and reduced leave entitlements, the survey found.

A breakdown of the results show that the biggest falls were in the area of professional practice, although the survey notes that there are signs of an increase in the number of advertised jobs in this area as many practices have hit “critically lean staffing levels”.

Those working in VAT and credit management, as well as finance staff with language skills, were relatively well shielded from cutbacks, the survey found.

Other sectors which saw a fall in salary scales for new positions included the IT sector, where pay levels fell by 15 per cent, and office support, insurance and financial services, which were all down 10 per cent.

The human resources sector had a mixed year, according to the survey. Although most human resource departments experienced redundancies and downsizing, many organisations were obliged to take on additional HR staff to deal with the downturn. As a result, the market for temporary HR positions was healthy, although permanent HR vacancies were at a minimum during the year.

Richard Eardley, managing director of Hays in Ireland, said 2009 had been “the most challenging year yet” for recruitment.

“As a consequence of the recession, highly-skilled workers across all sectors have seen reduced working hours and benefits, pay cuts and redundancies, with some hit harder than others.”

Pay cuts

70% of companies reduced payroll costs in 2009 by an average of 11%.

9% of companies implemented salary cuts

12% introduced unpaid leave

33% of companies introduced salary freezes in 2008 and 2009

50% of companies plan to implement salary freezes in 2010.

Source: Mercer

Salary levels

Drop in salary level for jobs advertised in 2009 (by sector)

Construction & Property – down by up to 30 per cent

Accounting & Finance – down between 10 and 20 %

IT– down 15 %

Office Support, – down 10 %

Financial Services – down 10%

Insurance – down 10%

Human Resources – varied.

Source: Hays