Canadian HR Reporter

CANADIAN HR REPORTER August 10, 2015 FEATURES 17 TOTAL REWARDS Figuring out total rewards in a rocky economy By Gail Evans W hat is the right direc- tion for a total re- wards strategy in the current economic turmoil? is has been a common question since the start of 2015. To answer, it is important to fi rst interpret the economic context in which organizations are operat- ing. Recent global factors include: geopolitical turmoil in the Middle East and the impact on the volatil- ity of oil prices; the recent Greek crisis and bailout by the European Union; and the new American agreement with Iran. Issues closer to home include a stronger economy in the United States, the falling Canadian dol- lar, low oil prices and uncertainty around a royalty review by the new NDP government in Alberta. e good news? Exports to the U.S. are increasing, particularly in manufactured goods and lumber. Plus gasoline costs are lower, as is infl ation, and slow economies in Alberta and Saskatchewan are expected to rebound. More balanced responses Although about one-half of em- ployers are reporting no change to their economic outlook, more organizations operating in the Western provinces are less opti- mistic, according to a June survey of more than 300 respondents by the Wynford Group. is trend is most dramatic in Alberta and Saskatchewan, while two of the strongest economic regions are British Columbia and Ontario. With the retraction in energy projects in Northern Alberta, salaries in the resource-rich prov- inces are showing lower increases and salary increases are markedly more modest across Canada (see sidebar). Human capital practices A trend we are seeing nation- ally is a sharp cut to hiring. Many companies are opting for a lean workforce and waiting to see the business impact of the unsettled economy before increasing the size of the labour force. Many indicators suggest orga- nizations are optimistic for the future, but are not prepared to commit more resources to human capital expenditures until condi- tions stabilize. Fortunately, the consensus of many economists is the worst of the "oil shock" has happened and there will be a slow and steady rebound throughout 2015, with 2016 starting to look brighter for most sectors. Cost management strategies Although there are variations in diff erent industries, cuts to bud- gets in areas such as training, usage of summer students, and reductions in overtime indicate some companies are under se- vere cost constraints. While these strategies (as well as hiring freez- es) are used to provide fl exibility, the signifi cant increases in layoff s or staff reductions are a more seri- ous indicator of structural change in some industries. As a number of organizations (particularly in oil-producing provinces) have experienced a dramatic decline in their eco- nomic situation, we looked at the strategies they are using to reduce costs yet maintain core skills with- in the organization. While "not replacing vacancies" was used by 50 per cent of respon- dents, "reducing hours of work" was a signifi cant proportion, at almost 30 per cent, as well as "in- creasing cost-sharing on benefi ts" (see sidebar). e most common approaches to reducing work hours included: •reducing paid hours of work on a daily basis and reducing paid days of work from fi ve to four •increasing the number of unpaid Fridays off •off ering additional unpaid vaca- tion or leave. is appears to be the result of lessons learned during the last recession where a greater number of organizations rolled back base pay, and then had to play catch-up once the recession was over. Smoothing out the bumps ahead As a result of the continued un- certainty, employers would be wise to to keep apprised of: •the broader economy and its im- pact on their industry •their strategic direction •their organizational culture and feedback from employees. ey should also continue in- vestment in HR infrastructure to be prepared for the next bumps in the road: •Focus on performance-based compensation to reward and re- tain key talent. •Look for unique learning oppor- tunities such as mentoring, cross- training and lunch and learns. It's also a good idea to consider total reward strategies such as: •using performance-based incen- tive strategies •reviewing pay mix and consider- ing more variable programs •developing a variety of variable pay strategies that include de- ferred short-term incentives as well as mid- and longer-term incentive programs •gain-sharing. Lastly, it's important to support employee engagement through: continued skill training and devel- opment, educational leaves, job sharing, fl exible time or days and wellness and fi tness programs. e period of turmoil does not appear to be fi nished so progres- sive organizations will stay fl exible in their approach to total rewards for different employee groups and keep an ear to the ground to respond to continuing changes, both internally and externally. Gail Evans is president of the Wynford Group in Calgary, which provides ex- pertise in developing a broad range of total reward strategies and national market surveys and infrastructure tools. She can be reached at wynford@ wynfordgroup.com. Human capital strategy Employed Planned Increase worker share 16% 12% of benefi ts cost-sharing Job sharing 7% 4% Offering unpaid vacation 8% 8% Encouraging leaves of absence 8% 2% Increasing unpaid days off 8% 6% Pay rollback 10% 1% Reducing hours of work 24% 5% Early retirement 12% 3% Deferred incentive pay 11% 4% Not replacing all vacancies 43% 7% Economic environment over next 6 months National East West Alberta Unchanged 47.6% 53.5% 45.5% 49.1% Growth 28.4% 41.9% 23.4% 14.3% Decline 24% 4.7% 31.2% 36.6% Highest average regional 2015 base salary increases: Zeroes Zeroes omitted included Canada 2.69% 2.41% B.C. 2.84% 2.50% Alberta 2.78% 2.43% Ontario 2.71% 2.41%

• Cover