Economic uncertainty: redundancies hit new high in HR sector as salaries surge

Figures released today show that redundancies amongst the UKís executive population have hit their highest peak since 2001, with data also revealing concerns for the HR sector. However, reflecting the confused nature of the current economic climate, data from a survey of 40,027 individuals also reveals increases in earning power.

The 2008 National Management Salary Survey, published by the Chartered Management Institute and CELRE, uncovers a redundancy rate of 3 per cent across the UKís senior management teams. The figure has more than doubled over the past 12 months (from 1.4 per cent) and is at its highest for 7 years, when senior redundancies reached 3.7 per cent in 2001. In the HR sector, the redundancy rate is 1.7 per cent, up from 1.1 per cent, last year.

Now in its 35th year, the survey shows that redundancies are highest amongst executives in East Anglia (12.1 per cent) and those least affected are based in Ireland (0.8 per cent). In terms of industry, manufacturing is the most widely affected sector, with a reported redundancy rate of 7 per cent.

Yet despite this evidence of economic uncertainty, the 2008 Survey shows an average movement in earnings of 6.6 per cent in the HR sector up from 5.6 per cent in 2007. Analysis of the data suggests that junior executives are the biggest beneficiaries in the sector, receiving an average increase in basic pay of 6.2 per cent, compared to 5.1 per cent for managers. At 7.9 per cent the largest pay rise was awarded to junior staff in East Anglia. The smallest (2.6 per cent) was given to directors in Scotland.

In real terms, the findings reveal an average basic salary of 21,643 for junior executives across the HR sector. Top of the ëbasic pay league tableí are those in the pharmaceutical sector. At 27,168 their salary represents a 33.2 per cent difference against the lowest paid junior executives, in the transport & logistics sector (18,419).

Surprisingly, given the economic climate and increased earning power, this yearís data also suggests that the UKís executives are willing to risk their job security. Resignations currently rest at 6.5 per cent, representing the second highest figure over the past decade. Across the HR sector, the figure is 7.3 per cent (up from 5.3 per cent in 2007). Employers in Scotland face the largest retention problem, with a resignation rate of 8.5 per cent. Employees in the South East are the most loyal, with just 4.2 per cent handing in their notice.

Asked why their employees leave, three-quarters (75 per cent) blame competition from other organisations or headhunting. Almost half (48 per cent) also recognise that they are failing to provide adequate career opportunities or development programmes. 1 in 10 admit that employees leave because of frustrations with the working environment (9 per cent). Similar proportions cite ëbureaucratic leadership stylesí (8 per cent).

Jo Causon, director of marketing and corporate affairs at the Chartered Management Institute, says: ìIncreased levels of pay are clearly not enough to retain employee loyalty despite the uncertain economic climate. Given the skills crisis, it is worrying to see so many executives voting with their feet and this must surely send a message to employers that, to retain the best talent, they need to address working environments and long-term career aspirations.î

Further analysis also shows that retention is not the only problem confronting organisations. 80 per cent of respondents continue to face difficulties filling vacant roles. Reasons given include a lack of candidates with specialist skills (70 per cent), the salaries on offer (57 per cent).

Respondents also suggest that and the nature of benefits packages available (12 per cent) are a factor affecting recruitment and retention. For example, the findings uncover a decline in the proportion of organisations willing to pay ëgolden hellosí to new recruits (23 per cent, down from 33 per cent, last year). The number willing to make ëreferral paymentsí to staff recommending potential new recruits has also fallen (from 82 per cent in 2007 to 73 per cent, this year).

Mark Crail, managing editor at CELRE, says: ìThis yearís study reflects the uncertain economic climate as it shows employers reacting to tougher times, but trying to find ways to retain key personnel too. Remuneration packages have clearly changed, but they must continue to evolve to meet the needs of the economy and workforce.î