Long-term retention problems for firms that don’t cut bonuses, warns CIPD

Organisations that do not reduce executive pay and bonuses could be harbouring a “ticking time-bomb” of retention and engagement problems, according to the CIPD.

Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development, told Personnel Today that companies that were struggling during the recession and have had to freeze pay or cut staff hours must make sure senior managers were not being rewarded inappropriately.

He praised the heads of major companies such as Motorola, banking giant HSBC and Google, who recently forfeited their bonuses, and chief executives at Goodyear and Hewlett-Packard who have reduced their salaries by as much as half during the downturn.

Cotton said: “Some firms are choosing not to do this, and their employees are finding there is one rule for rich and one rule for poor.

“This could be described as a ticking time-bomb, with severe effects on retention, employee engagement, even fraud, among disgruntled employees who feel the company leaders aren’t sharing their pain. When the downturn ends and employees are no longer as worried about their jobs as they are now, HR will be facing significantly more headaches.”

He added that decisions not to cut executive pay or bonuses in line with reductions in staff pay or benefits would also have a negative affect on the employer brand.

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