Firms face struggle to keep hold of top talent

Management are walking a precarious tightrope this summer as the appraisal season kicks off and firms’ top talent weigh up their career options ahead of the possibility that they may not be earning a pay rise or bonus this year.

Many staff at firms are becoming increasingly anxious ahead of the appraisal season for fear that they won’t receive what they consider a well-earned pay rise and bonus, while others have already spent their anticipated rewards.

The anxiety stems from the fact that some firms’ HR teams have been sending out warning signals early on indicating that staff should not take it for granted that this year they will receive the usual pay rise or bonus because of the economic downturn.

But employees are angered because they say they have maintained the same standards of quality in their work and therefore ought to be rewarded. Some are threatening to leave if they don’t receive a pay rise.

‘I’m working harder than ever before and it would be nice if that could be recognised in some small way. I’m constantly praised for my standard of work, but words don’t pay the bills.

‘If I don’t get a pay rise I will definitely think twice about staying. I think there are some people who deserve a rise and others who don’t and I think whoever makes the decision needs to take a long, hard look at who they really want to keep. Obviously at the moment the job market is difficult, but I’d certainly explore the options,’ says one accountant at a top 20 firm, who wishes to remain anonymous.

The strength of firms’ people could also prove to be their weakness if this year’s appraisals are not well managed. People are attracted to the industry in the first place because they are highly intelligent, motivated and ambitious career people. Although many understand the economic constrains placed on firms at present, it’s unlikely they will be happy to continue to work hard without reward, while many will look for alternative options.

Ingrid Waterfield, UK head of reward at KPMG, says: ‘Wherever possible, we aim to pay a bonus where the business delivers results. But we have said that we envisage reduced bonuses this year due to the recession.’

Grant Thornton says there will be ‘minimum movement upwards’ this year in terms of pay rises, but have communicated this early to staff. It’s unlikely there will be much in regards to bonus payments either, but it has promised to review the situation.

Mick Holbrook, director of organisation and people development at PricewaterhouseCoopers, says that until the board knows the actual performance of the business, which would be mid-June, no firm decision had been made. He adds: ‘We have said that we would anticipate there wouldn’t be widespread large rises in salary or bonuses this year.’ Holbrook adds that this has been clearly communicated throughout the firm since the beginning of the year.

Even though some staff aren’t expecting pay rises they do not accept the situation unconditionally. ‘I’m not really expecting a pay rise. It will be great if I get something, but I’m not holding my breath. I’d be happy knowing that no one is getting a pay rise if it means a guarantee of no redundancies,’ says another accountant at a top 20 firm.

Some firms may chose to promote deserving staff without monetary reward, or even a deferred pay rise, but whether such a move will satiate the most ambitious among employees is uncertain.

While the job market is tough at present there are options for the best employees. Firms are continuing to grow certain aspects of their businesses, such as forensic and restructuring, while also preparing other teams for the upturn. Poaching disgruntled staff has not died away and employees know this.

Lucy Davison, associate director at recruiters FSS, says: ‘In our experience employees are taking a longer-term view and focusing on keeping their jobs and making career development their number one priority.

‘Having said that, it is important for employers to focus on retention and invest in their best people if they are to keep them once the upturn happens. Having the right talent in place will be crucial if firms are to take full advantage of the recovery and that means really focusing on key employees who add real value and ensuring they are rewarded. Failing to focus on retention techniques now may have dire consequences for staff attrition later on.’

Stevan Rolls, head of HR at Deloitte, says he couldn’t comment on staff pay or bonuses, but that circumstances were ‘exceptional and everyone understands that’.

‘We are encouraging managers to be honest and realistic and stay close to their people. People are worried no matter how much reassurance we give,’ he adds.

Times are indeed tough, but management shouldn’t take advantage of the situation to avoid rewarding those who deserve it. If it is a case of rewarding partners, but not the bulk of staff, then that sends all the wrong signals and could cause unnecessary divisions when management and staff need to be pulling in the same direction.

That said, staff need to be realistic in their salary expectations in these exceptional times. Perception is of equal importance. We only have to look to what’s happening in parliament to understand how much perception matters irrespective of the rules.