03.07.2020

UK companies uncertain how long pay cuts, pay freezes and furloughs will continue

As the United Kingdom slowly begins the process of re-opening businesses, workers continue to see pay and benefit cuts plus layoffs and furloughs, and many businesses are not sure how long it will last. That is according to a new Korn Ferry survey of corporate rewards and benefit leaders.

In the late-May 2020 survey, more than a third (34 per cent) of respondents said their companies have implemented salary cuts or are considering them, 53 per cent have implemented salary freezes or plan to, and 40 per cent say they have, or are considering, deferring salary increases.

Almost a third of companies cutting wages say the cuts will last three to four months, and almost a third of the survey respondents also said that cuts will last for five to six months.

In addition, over half (57 per cent) have implemented or are planning temporary furloughs leveraging government subsidies. While 33 per cent say the furloughs are expected to last two to three months, 37 per cent say they do not know how long the furloughs will last.

More than a third (48 per cent) have either implemented or are considering permanent layoffs, affecting 16 per cent of their workforces on average.

Other statistics from the survey:

22 per cent are offering voluntary unpaid leave
68 per cent are delaying new hires
37 per cent are reducing overtime
15 per cent have implemented or are considering early retirement programs

“Since we first conducted our first survey in this series in March, we’ve seen a continued increase in the percentage of companies implementing reductions in pay, benefits and staff,” said Korn Ferry Global Benefits and Reward Leader Don Lowman. “With the uncertain path this pandemic is taking, it’s critical that organisational leaders monitor the situation regularly and adjust plans to meet the evolving situation, while still keeping an eye to longer-term recovery.”

Moving Forward

When asked what they will do differently post-crisis, 94 per cent said employees will continue to work more virtually. More than half (60 per cent) say they will be more disciplined about cost management, and 50 per cent say they will be more focused on transparency with employees.

The majority of organisations (75 per cent) expect changes to their total rewards programs during the next six months to two years, with 41 per cent expecting significant changes.

“It will take time to adapt to a new way of doing business, but company leaders must remember that to attract and continue to engage the best talent, they will not only need to have a competitive rewards and benefit program, but a program that is valued by employees and is cost effective,” said Lowman.

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