HR Management Practices in Crisis Context

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When setting the 2009 budget, employers were hatching ambitious plans, implying their business would progress positively. At first, this applied to staff headcount and salaries. However, the financial turmoil in the country has brought about sharp changes in how the situation in the domestic labor market unfolds. Today, the first consequences of the crisis can already be assessed. But it is safe to say that the peak of layoffs is in the past! About 49% of employers in Russia have no plans to cut staff in 2009.

The market today is turning around – its key players are changing. The crisis often does not involve entire industries (except for construction and a large part of metallurgy), but rather single organizations, i.e. of two listed companies, one may be really bad, while the other may be perfectly fine. Some former recruitment leaders are not leaders anymore and have suspended their vacancies, while other companies have been lifting their heads and placing orders with recruiters. Therefore, the names of the leaders are changing, but the number of vacancies in the market as a whole has not been declining in the last three months.

This is despite the fact that, since the crisis broke out, a lot of skilled professionals have become available on the market as a result of layoffs in a number of large companies. While this will cover the deficit in certain specialist areas and categories, this is just a temporary situation. According to our information, employers are in huge need of certain skills, and the supply is still unable to satisfy the demand. Deficit of personnel is still a fact of life in the traditional industries, like manufacture; FMCG; pharmaceuticals; oil and gas. The agricultural sector (processing, machinery) is suffering from a huge lack of a skilled workforce. The same is true for the lumber industry.

Therefore, what HR management measures are most popular with employers in the crisis context?

Change of salary

In 2009, most companies of various industries operating in Russia do not intend to change salaries of their staff (meaning they will maintain the salary on the 2008 level).

Among the 33% of companies willing to change the salaries, 19% of companies will raise them, 14% will reduce them.

Change the currency of the salary

As for the currency of the salary, on the whole, across Russia almost all employers set their salaries in rubles and have no plans to change the currency throughout 2009.

During the years of an appreciating ruble -- from 2003 to the fall of 2008 -- companies were switching from salaries denominated in US dollars to salaries set in rubles at a pace comparable to the foreign currency depreciation rate. The trend was economically reasonable in terms of switching back to the national currency as the main tender for settlement with employees.

Currently, a reverse trend is observed, raising a question if a reverse switch from the ruble to dollar and euro as a salary denomination currency will take place. We believe no wide-scale migration to a foreign currency as a salary denomination unit will occur due to the following reasons.

1. First, the appreciating dollar is a temporary phenomenon and everybody understands that. At this time, the American currency does not have a solid foundation to be a universal equivalent of value.

2. For years, salaries denominated in dollars were a guarantee that the income of employees would not decrease along with the national currency's exchange rate, thus being an employee attracting or retaining factor. Today, during the crisis, when companies seek to save on all sorts of things, including staff costs, using salary cuts as one of the measures, it is not a matter of retaining specialists by fixing their salary in U.S. dollar units. The market is different! We expect this situation to persist throughout 2009.

3. Dollar-denominated salaries are quite inconvenient and difficult to manage, as, according to the law, disbursements must anyway be made in rubles. Linking the salary to the spot exchange rate on the disbursement date carries certain risks (exchange rate volatility may lead to a situation where the salary in a certain month will be less than in the previous one, which may pose legal difficulties); linking the salary to the spot exchange rate on the employment date is fraught with unease between staff (e.g., two accountants with the same job description employed with a one-month interval will receive different pays); setting a company's internal exchange rate is not a guarantee either and provides no additional benefits.

Cancellation of benefits

From October 2008 to February 2009 42% of companies canceled all or some of their benefits.

Most commonly, companies have canceled corporate entertainment events, training and development programs, payment of meals, sports benefits and voluntary health insurance.

Layoff of staff

On average across Russia, 18% companies intend to cut staff. In Moscow this figure is at 19%, while in the regions it is from 13% (South region) to 22% (North West region).

The in-risk group are, firstly, office staff. Employers need fewer employees with business expansion-related skills, i.e. client relationship people, for new branches and offices.

"Versatile" specialists, those capable of working in a variety of areas, which were previously taken care of by several people, are better off. For example, a staff search, selection, adaptation and training manager with HR document workflow skills. Before the crisis, those jobs could be performed by 2, or even 3, people.

It can be said that, in view of the crisis, across the whole of Russia there is a demand for the managers who successfully managed businesses in 1998.

On the whole, specialists, who just a few months ago expected a relatively high pay, will probably have to put up with amounts 1.5 to 2 times less. Many candidates, taking advantage of the financial crisis, are in a hurry to raise their professional level by attending training events or courses to stay competitive in the labor market. In these circumstances, it is a good recommendation to candidates to consider all possible offers. Those who, for whatever reason, are not willing to decrease their financial expectations may find themselves searching for appropriate offers for as long as 5-7 months and more. The crisis is supposed to teach the society to appreciate their work irrespective of its pay.