Good News for Employers

Some good news for employers: Following several years of two digit salary increases in ruble terms this year has so far seen only very modest increases in ruble salaries. The majority of our international clients have actually kept salaries flat. Because of the devaluation of the Russian currency we can actually see a 25 to 30 percent reduction of salary cost in euro terms. Unfortunately, as a large share of foreign -businesses are selling in the local currency this cost reduction in Euro terms does not result in any profitability gains.

Q4 2008 and Q1 have seen quite some significant downsizing in the construction sector, B2B sector and the support functions. There seems to be a big difference in the approach between local Russian companies and international players.

More than 45% of our local clients have reduced salaries. A large share has also significantly reduced staff and are not paying bonuses. In international companies the picture so far looks slightly different. Less than 10% have actually reduced salaries or informed their staff about a potential salary reduction. Bonuses for 2008, as long as they were earned and accrued for, are still being paid out in more than 80% of our international client base. However, for 2009 the majority of companies have already started informing their staff that the bonuses for 2009 in the best case will be reduced or very often be cancelled completely.

The competition among candidates is increasing and for the first time in many years we are actually seeing a reduction of the rate of increase in salary for candidates when they are moving into new jobs. Candidates without work will accept lower salaries now. It has to be mentioned though that during the first reduction waves many employers used the opportunity to make under performing staff redundant. As a conclusion recruiters need to be extra careful with the current selection of candidates on the recruitment market. On the other side strong sales manager candidates, excellent Pharma product managers and various other key personnel are still very rarely represented on the recruitment market.

The big cost reduction pressure has also meant that companies have exploited other HR related areas to counter the reduction in sales volumes. More than 60 percent of clients employing more than 100 staff have mentioned that they are currently investigating ways to reduce costs by changing expat contracts into local agreements or in other cases sending international employees home. Many companies have drastically reduced perks such as improved insurance schemes, company cars and fitness center allowances.

Unfortunately, we have also seen an increase in so called grey salary schemes where, for example, employees are officially on holiday or off sick receiving the statutory salary but working full time. The difference is usually paid in cash. There has also been an increase of service providers offering services, but not charging the statutory required payments.

As in the past there is a big difference between the Moscow market and the rest of the country. The regions have been much more severely affected than the capital. Especially regions where one company employs the majority of the work force. Many recruiting businesses were forced to close some of their regional networks or at least reduce staff significantly. There have also been some more acquisitions in the recruiting sector and several more deals seem to be in the pipeline.

The year 2009 will see an increase in the demand of outsourcing, out staffing and creative ways of organizing motivation programs as well as trainings with limited budgets.