Pay cuts and freezes in automotive sector - PwC comment

Pay cuts and freezes in automotive sector - PwC comment on reducing employee reward costs and flexible working

Following news of further pay cuts in the automotive industry, PricewaterhouseCoopers LLP (PwC) reward, human resources and automotive experts are available for comment.

Talking about reward cost control, Jon Terry, partner and head of reward, PricewaterhouseCoopers LLP, said:
ìThe manufacturing and media industries have taken the lead on pay freezes and offering reduced hours to save jobs. But it is important that organisations across all sectors do not miss a trick by only targeting these techniques to reduce their people costs.

ìThere are cost significant savings to be obtained across other aspects of employee reward, particularly in the effective structuring and operation of share plans and bonus payments. Organisations should look at these arrangements, including underwater share and option awards, since there are both cashflow and cost savings to be made across a number of areas.

Commenting on the importance of the manufacturing industry in the UK, Matt Alabaster, auto expert, PricewaterhouseCoopers LLP, said:

The UK is home to many leading manufacturing companies with globally competitive positions. These are exceptional times for the UK manufacturing sector, and we need to ensure that the current crisis does not damage our long-run positioning in the global market.

Manufacturing is a long-term industry. Business strategies, investment decisions, analyst reports and government policies all need to realise that competitive advantage is built up over many years, but can be destroyed very rapidly. With the support and involvement of the Government, we believe manufacturing will come through the current crisis.

Commenting on the growing trend of offering flexible working arrangements to save jobs, Matthew Thorogood, partner, PricewaterhouseCoopers LLP, said:

ìCompanies will each have their own unique breakeven point between absorbing the cost of redundancies and implementing flexible working arrangements, such as a reduced working week or wide-spread sabbaticals.

ìWhen under cost pressure, it would be a mistake for companies to make the leap from freezing pay and other people cost savings to reducing headcount without looking at flexible working, workforce planning and performance management options. Flexible working can be tailored according to the requirements of the individual company and allows organisations to retain a lean workforce comprising the key skills they need for the future.

ìIdentifying the true cost of redundancies means not only considering payments and benefits in lieu of notice, together with consultation and legal fees, but also pension costs, the cost of re-recruiting and inductions when the upturn comes, plus the dip in engagement and productivity that often comes with losing staff.

If you are writing on flexible working, PwC can model the cost of implementing different workforce models (e.g. the cost of four-day weeks if 80% of workforce adopt this model for two years) for case study material – please contact Lydia Ruffles on 020 7213 4075 if this is of interest.