HR career issues: executive pay rises during redundancies

Q How do I convince executive directors that awarding themselves pay rises when we have had to make a number of staff redundant would be bad for staff morale, and therefore the company?

The HR expert’s view

This is a real dilemma, particularly if you work for a private organisation where the pay is set by the internal board. Have you challenged them to come up with a clear communication brief to the business that not only ‘justifies’ the rationale for redundancy but also why they have awarded themselves a pay rise (or intend to)?

I think you need to be direct with them and explain the impact their intentions will have not only on staff morale but also on possible reduced productivity and increased turnover/resignations, which would inevitably result in higher recruitment and training costs. You need to present a business case to them with estimated costs – costs to the business, not just in emotional terms. And find out what your competitors are doing. If productivity was affected, whether by having less staff, increased absence rates or by low motivation, how detrimental would this be to your business?

It may also be worth presenting the negative image this may send out to your customers were they to find out about it, particularly if you link this in to your core values as a business.

Esther O’Halloran, HR director, Paul UK

The recruitment expert’s view

That any executive board could consider awarding themselves pay rises while recently or currently making redundancies beggars belief – but it still happens and still has to be addressed.

The straightforward solution would be to embarrass them into the realisation of how inappropriate pay rises would be. But the last thing you personally want to do is to create a confrontational environment with the directors responsible. Look beyond media ‘hysteria’ and tabloid reporting of executive pay rises – find some solid research into the subject and ensure your argument is not just an instinctive, knee-jerk reaction but one based on substantiated and empirical evidence from real-life cases.

Finally, and especially if your company has made recent redundancies, it might be a good time to subtly canvas employee opinion. Without, of course, asking the direct question, an employee survey into current perceptions of their organisation, its direction and leadership would both reflect well on the HR process and, if positioned carefully, possibly throw up some further material with which to counter the executive pay rise issues.

John Maxted, chief executive, Digby Morgan

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