The economic crisis has brought waves of redundancies to many large companies in Russia this year, with thousands of people losing their jobs. Many of those who were lucky enough to keep their jobs have been faced with salary cuts or a reduced working day or week, and benefits packages in many organizations have become an unaffordable luxury.
“With the crisis, employers had to review their outgoings, and in most cases the reduction of social benefits packages was one of the most widespread optimization measures,” said Svetlana Lavrinenko, head of the recruitment department at Ancor.
“In many cases, cutting down on benefits allowed companies to keep jobs and avoid mass redundancies.”
Most of the employees who suffered from such measures work for Russian companies. Before the onset of the crisis, the economy was booming and potential for success seemed limitless. Many organizations introduced a transparent payroll scheme and began to introduce additional options into the benefits package.
“The crisis has put everything in its place,” said Tatyana Tangisheva, business development director at HPS Group.
“The first victims were the insurance companies, as Russian organizations stopped providing medical insurance, and also reduced mobile phone expenses.”
According to the results of a survey published by Antal Russia Recruitment, middle-ranking and senior managers identified three aspects of social packages that they considered to be most important: Medical insurance (cited as “very significant” for 48 percent of respondents), accident insurance (19 percent) and a corporate car or allowance (17 percent). These factors play a role in choosing an employer.
The same survey showed that employees are mostly indifferent to options such as free or discounted company products or corporate transport to an inconveniently located office. A third of those surveyed said they expected cell phone expenditures to be covered by their employer.
“The first thing on which employers started saving money during the downturn was expensive training and development programs, along with fitness,” says Galina Nemtchenko, partner at Antal Russia. “Companies reviewed their insurance packages, and tried to cut costs on cell phones and lunch allowance. If the companies used to offer corporate cars, now they are mostly only offered to managers who really need one in their daily work.”
Russian companies have never been renowned for the variety of social benefits on offer, tending instead to offer higher salaries and regular bonuses, but for international companies the social benefits remain an integral part of the compensation package for employees and reflect the level of the company.
“If large international companies started reducing their benefits package, it would be reflected in the employee’s loyalty and efficiency of their work, which is extremely important within the context of a decline in general sales volumes,” said Tangisheva.
“A global freeze on hiring and restrictions in working with staff recruitment firms, training and evaluation are the most typical ways of economizing.”
The return of pre-crisis work conditions depends not only on the stability of the economic situation, but on the will of the individual company. The crisis has even enabled companies that have not suffered seriously from it to make cutbacks.
“There are a lot of examples in which companies intentionally do not show money, reduce expenses and cut benefits and compensation packages,” said Tangisheva. “The general situation at other companies justifies such decisions, so there is an opportunity to economize without decreasing efficiency.”
Companies will first bring back the most essential benefits. As every employer has their own tasks and requirements, the decisions will of course be made on an individual basis. The situation with salaries is similar. In an employers’ market, employees will have to really prove they are worth the salary they want.
“Salaries are a serious expenditure,” said Tangisheva. “They can be increased only when really necessary. Consequently, it will take far more time for things to be restored than that needed to destroy them.”
For employees, pay cuts and reductions in the working week are invariably painful, especially if the company policy is not transparent and staff do not know whether or when to expect further decisions from their employers. It is essential that staff understand why such measures are necessary, say HR specialists.
Generally, people who like and respect their company not only as a result of their salary are prepared to go without some benefits in order to help their company to survive.
“[Such measures] should only be for a specific period of time, because every limitation should be justified by plans, tasks and their realization,” said Tangisheva. “If terms are not followed or are not even discussed beforehand, a feeling of dissatisfaction will grow.”
This autumn will see movement toward stability, according to Ancor’s specialists.
“Most companies have an annual budget, so it is impossible to talk about the full restoration of all benefits this year,” said Lavrinenko. “Some employers, however, plan to increase salaries and restore benefits from the beginning of next year.”
Many companies have returned to a full working week, and sales and consumption in some spheres are once again approaching pre-crisis levels. Organizations have implemented effective anti-crisis programs that have allowed them to return to work.
Economists however warn that talk of a recovery from the recession is an illusion.
“The situation in most companies is really very bad. They are in serious difficulties,” said Mikhail Romanovsky, head of the finances sub-faculty of the St. Petersburg State University of Economics and Finance and chairman of the board of directors of the Institute of Independent Social and Economic Research.
Romanovsky identified different patterns depending on the source of income. Employees who receive their salary from the federal budget will not see it increased, while those who are paid from the St. Petersburg budget will see their wages increased next year in two stages, increasing them by 14 percent compared to their current level, he said. Salary recovery is highly individual in every company.
“If a company is developing its business and feels a lack of employees, it will change its salary policy,” said Romanovsky. “It aims to retain its staff and will not expand it during a crisis period.”
A one percent decrease in company revenue can mean as much as a five percent decrease in profit.
“Moreover, there will probably be an increase in social payments,” said Romanovsky. “So if the company increases an employee’s salary, it will pay taxes of not 26 percent, but approximately 36 percent from Jan. 1, 2011. Every ruble of the salary will be more expensive to the employer.
“Companies take this into account. It is easy to increase salaries, but it is much more difficult to reduce them.”
Economists predict that companies will increase salaries very selectively. The lucky ones will be categories of workers in which there is a lack of qualified personnel.
“People shouldn’t wait for manna from heaven,” said Romanovsky. “The crisis is serious and long-lasting. We will be coming out of the recession for two or three years.” He said it would only be possible to talk about salary increases in two years’ time.
By Olga Kalashnikova
