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Ireland — 70% of companies have reduced payroll costs in 2009

15 December 2009

According to a new report by Mercer, the Human Resources services and financial advisers entitled 'Planning for 2010 Snapshot Survey', 70% of organisations in Ireland have reduced payroll costs by an average of 11% in 2009.

Cuts in pay rates were only undertaken by 9% of organisations while 12% implemented unpaid leave. The survey included 104 organisations across different industries in Ireland and explored cost managing measures taken in 2009 and organisations' plans for 2010. The organisations in the survey are primarily subsidiaries of multinational corporations and large Irish companies and represent some of the largest private sector employers in Ireland.

In undertaking payroll cuts, the most common means of reducing costs are hiring freezes, compulsory or voluntary redundancies, reduction in overtime or reduction in incentive payments. According to Patrick Robertson, Senior Consultant with Mercer "companies are seeking to reduce the cost of doing business by various means, however cuts in pay rates are the exception in the larger organisations."

Over half of organisations are projecting a salary freeze for 2010. Of the organisations that are providing an increase in 2010, the average reported increase is around 3%. Mr Robertson noted "with so many companies freezing salaries, we thought it would be interesting to look at what companies are doing over a two year period, in effect comparing the projected 2010 salary to that paid in 2008. Excluding senior executives, approximately one third of companies are keeping 2010 salary rates unchanged, or frozen, from 2008. Overall, the median increase received by employees is between 2% and 3% over the two years. Salary freezes are more common at the senior executive level."

In addition to cuts in payroll costs, 57% of organisations reported changes being made in at least one of their compensation and benefit plans. The plans receiving the greatest attention are Defined Benefit (DB) pension plans, company cars and training and education policies. For those with DB pensions, closing the plan to future members or future service were the most common changes listed.

Two thirds of organisations indicated that they would have a Christmas party this year. Mr Robertson noted "many large organisations are continuing to hold Christmas parties. However, the budget allocated to the party has decreased from last year in the vast majority of companies."

Although organisations are continuing to make changes to reduce costs, Mr Robertson noted "the number of organisations forecasting redundancies has halved from 2009, so there is some reason for optimism from the survey results. In addition, across all the cost saving categories, the percentage of organisations implementing cost saving initiatives is forecast to decrease from 2009 levels."



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