OREANDA-NEWS. August 07, 2009. According to the results of the express survey AS PricewaterhouseCoopers conducted among the leading Estonian companies and organisations, 2/3 of the surveyed companies have made employees redundant and 1/3 have reduced basic salaries in the last 6 months. Nearly half of the respondents have cut performance pay and other monetary and non-monetary benefits, reported the press-centre of PricewaterhouseCoopers.
 
 The survey conducted among top-level and financial managers of Estonian companies asked to what extent the companies have already cut or intend to cut the basic salaries of employees on various levels and what other cost-saving measures they have implemented – reducing performance pay and various bonuses and non-monetary benefits, forced leave, part-time work or redundancy. Somewhat surprisingly, there are still a number of companies that have not had to introduce radical labour expense cuts.
 
2/3 of the companies have reduced or are about to reduce the number of employees, while nearly 1/3 have introduced part-time work or forced leave
 
The results of the survey showed that 66% of the respondents have already made employees redundant or are planning to do so in the nearest future. 36% of these companies have lain off employees on all levels, 23% have mostly lain off unskilled employees and 6% primarily specialists and members of management. 34% of the respondents have not reduced and are not planning to significantly reduce the number of employees in the nearest future.
 
Forced leave has been used by 28% of the companies, of which about a half have used it in the extent of up to one week per employee, while the other half have used forced leave of more than a week per employee. 30% of the companies have used part-time working option.
 
1/3 of the companies have reduced basic salaries
 
It was somewhat surprising that approximately 1/3 of the companies have cut basic salaries. The companies have cut the salaries of mid-level managers the most (38% of the respondents) and the salaries of unskilled employees the least (27% of the respondents). In most cases, basic salary has been cut by 10% (approximately 2/3 of the companies that had reduced salaries) and only in few single cases by more than 20%. The majority of the surveyed companies had already implemented the planned cuts in salaries, while only a tenth of the respondents are planning to cut salaries in the next 6 months.
 
Juri Etverk, PwC’s leading consultant, commented the survey results: “The fact that salary cuts in leading companies have mostly involved mid-level managers and specialists, leaving unskilled labour fairly untouched, may at first glance seem surprising, but it probably reflects the trend that when demand drops, companies tend to make unskilled workers redundant, as the need for them depends directly on the market volume.” According to Etverk, cuts in the salaries of unskilled employees may cause real subsistence problems for them and result in a decline of morals, motivation and work performance in the company. Besides business considerations, company managers also feel a social responsibility and therefore tend to cut the salaries of the better-paid management and top-level managers rather than the salaries of ordinary workers.
 
40% of the companies have reduced performance pay and other benefits
 
38% of the companies have reduced or decided to reduce performance pay, with the cuts mostly remaining under 20%. 40% of the respondents have reduced or decided to reduce various other cash benefits (e.g. Christmas bonuses and holiday benefits). The cost saving thus achieved is generally less than 5% of the total personnel expenses (58% of the cases) or between 6-10% (21% of the cases).
 
38% of the companies have reduced or decided to reduce non-monetary benefits like car, fuel, parking and mobile phone compensation. The cost saving achieved through cutting non-monetary benefits is generally also less than 5% of the total personnel expenses (59% of the cases), although there are companies that have managed to cut costs by over 20% this way.

According to Juri Etverk, employees often perceive benefits as being more valuable than they actually are and cutting the benefits often does not provide a sufficient financial effect compared to the level of de-motivation caused. “At the same time, there are certainly exceptions, where companies have over-exaggerated with all kinds of benefits, which were also reflected in the survey – in nearly a third of the companies cutting costs, the volume of benefits made up over 20% of the payroll funds,” Etverk added.
 
PwC’s Senior Partner Ago Vilu says there are no miracle cures that would be more effective against the crisis than other measures. “The diminished demand may cause the need for redundancies in order to cope with the decreased sales prices and cutting salaries or other benefits may prove inevitable. Reviewing and increasing the efficiency of internal processes may also provide the needed cost cuts. It is clear that only those whose business is immune to the crisis can afford to do nothing – but there are very few of those today.”
 
Background:
 
Express survey of changes in the salary policy of top Estonian companies was conducted in the last week of May. Responses were received from the top-level and/or financial managers of 48 companies; 67% of the respondent companies have the annual sales turnover of over 200 million kroons and 69% of the companies employ more than 100 people.
 
PricewaterhouseCoopers (www.pwc.com) is the world’s largest organisation providing professional business advisory services to the public and private sectors. Using the knowledge and skills of more than 155,000 people in 153 countries, PwC helps its clients to create value, increase trust and give the market accurate information about corporate activities.In Estonia,PricewaterhouseCoopers employs nearly 100 professionals in the field.