The Effect of Recession on Rewards Management

Impact of the Recession on Rewards Management

The previous articles in this module had discussed the various facets of rewards management and the factors that determine monetary and nonmonetary rewards. This article discusses the impact of the ongoing economic crisis on the quantum of rewards both monetary and nonmonetary that are being actualized across the world. To start with, except for Wall Street and the Bankers, salaries have taken a hit in almost all sectors. Indeed, it can be said that the quantum of the pay hikes has been substantially lower across all sectors and everywhere in the world ever since the great recession has started.

Further, many organizations have scaled down on their budgets for fun and entertainment as well as cut down on the nonmonetary rewards like perks and benefits. The implications of the recession on rewards management have indeed been dire and gloomy.

Lack of Choice for Employers and Employees

In this scenario, the challenges before the HR function and the organization to retain quality talent are many. For instance, employees might seek employment elsewhere if they are not being rewarded for their contribution. On the other hand, the employees might find that getting jobs elsewhere is a challenge as the available opportunities in a slow growth economy are few. Hence, there is a cat and mouse game being played here between the organizations and the employees as both sides try to engage in a conversation about hiking pay and the lack of alternatives. Of course, as mentioned earlier, quality talent always finds opportunities and hence, the HR function and the line managers often take recourse to hikes for only outstanding performers since they are afraid of losing these employees. However, for the vast majority of the employees, the choices are stark as they cannot leave the current employer and have to put up with no or less salary hikes.

The Party is Over!

On the nonmonetary front, the biggest casualties are the perks and benefits. Across the world, organizations are reducing their outlays for nonmonetary rewards like providing for subsidized food and the provision of company transport. Indeed, as the experiences of multinationals in recent years shows, they are removing these and the other benefits like reimbursing children’s education and withdrawing allowances like sponsored vacations. Moreover, organizations are also resorting to curtailing their budgets for fun and recreation as well as awards for recognition. Indeed, the situation has become so dire that organizations are cutting down on the availability of coffee and other beverages that are provided free along with snacks in the breakout areas.

Closing Thoughts

Finally, the fact that both the employers and the employees cannot remedy the situation until the market improves means that the best way out would be to accelerate one’s performance. However, this is easier said than done as the competition for scarce resources intensifies as well. Hence, the implications of the ongoing recession are such that the rewards structure would need to be rethought to ensure that employee morale and motivation do not sag. This would be discussed in detail in subsequent articles along with the impact of industry wide trends on rewards management in the context of the ongoing recession.


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