Cost Cutting Examples of Compensation Plans

6 Simple HR Strategies for Reducing Company Costs During a Recession

With layoffs and benefit cuts happening all around us, it’s a crucial time to strengthen the relationship between HR and business strategies. Like many companies, your business is likely tightening its belt, trying to find ways to cut costs and survive on lower profits. As an HR professional, now is a great time for you to take a leadership role and share ways HR can save your company’s money.

Need some ideas? During two webinars in February 2009 – Employee Retention: High Impact Performance Management for Engaging and Retaining Your Top Performers and HR Planning: HR’s Role in Strategic Workforce Planning for 2009 and Beyond – PayScale sat down with business leaders from a variety of industries and locations and asked them for a sample of HR strategies they were using to lead their organizations’ human capital and cost management efforts.

The results? Innovative and inspiring. The information presented here represents these business leaders’ examples of compensation plan strategies and approaches that will save your company’s money.

HR Cost Cutting Strategies: Examples of Compensation Plan Adjustments and Improvements


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Do you fret over losing your top employees? Feel confident you’re paying and managing them better than anyone else in your industry. View our webinar Employee Retention: High Impact Performance Management for Engaging and Retaining Your Top Performers and get ahead of the competition.

HR Compensation Strategy #1 – Hiring Practices

“We are paying a hiring bonus rather than a higher salary.”

“It’s really a relief to be able to do a better job during the hiring process, rather than a rush job. We’re getting much better hires again.”

HR Compensation Strategy #2 – Balancing Compensation Packages

“We have undertaken a project to identify market salary ranges and identify overpayment and underpayment in an effort to balance wage costs across the board.”

“We froze compensation to senior executives but kept increases – although less than normal – for top performers.”

“We’ve cut base salaries by $5,000 for the first six months of employment. With normal attrition, this will save us $400,000 a year.”

HR Compensation Strategy #3 – Benefits

“We are suspending 401(k) match for the time being.”

“We brought our 401(k) advisor in to do a brown bag session on creating a budget and debt management for our employees.”

“We did away with pay in lieu of PTO (paid time off) and are now on a ‘use it or lose it’ policy. This eliminates huge payouts to employees when they leave.”

HR Compensation Strategy #4 – Employee Training & Development

“We have created an admin pool. All of our administrative staff are cross-trained.  The team serves as a pool that the organization can call upon when help or extra assistance is needed.  This way, we do not have to bring in temps.”

“(HR Consultant) I am helping clients utilize on-the-job training or wage reimbursement programs sponsored by the state government.”

HR Compensation Strategy #5 – Staff Resourcing

“We have partnered with a local university to hire interns who are working part time at a set salary. They do not receive benefits, but they do get on the job training while we fill positions at a lower pay rate.”

“We are allowing employees to schedule a rotating ‘layoff’ week to avoid job elimination.”

HR Compensation Strategy #6 – Organizational Communication

“We are being completely transparent with the financial condition of the organization, with the CEO giving an update every other Friday.”

“Don’t forget the importance of bringing people together to celebrate the success of the organization. Include the leaders to prevent a perception that they are hiding.”

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Are you sure you’re paying your top performers at the market rate so you can retain them once the economy recovers? Where are you getting your compensation data? Consider giving a PayScale demo a try to see how you compare with your competition.

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