| MAIN FEATURE >
Rewarding loyalty
Written by: Jason Hovet, Petr Vykoukal
Photo by: Vojtěch Vlk
While salary growth remains steady,
both employers and employees are finding better value in benefit
packages. "Carpe diem" doesn't apply here, as the most
common benefits are now more forward-looking.
GONE ARE THE DAYS of switching jobs for a
raise, as many candidates currently on the job market have been
forced to take a pay cut, and are also left with a weakened CV. "People
have definitely learned the hard way," says Robert Poulson,
country manager for recruiter Job Shop. "You'll see a lot
more loyalty now," he adds. Bidding on job candidates is not
really practiced anymore, and, according to Petr Žídek, senior
consultant at Synergie Recruitment, managers with a few years experience
that want to find the same position in a different company can
now expect a lower starting salary - although an exception often
occurs when a person is headhunted. For most employees, the best
way now to advance their financial situation is staying and developing
within the same company.
According to PricewaterhouseCoopers' annual Pay Well salary survey,
salaries continue to rise steadily, although the growth has dropped
slightly. In the survey years (measured from July to June) between
2002-04, the real increase of wages was 6.9%, 6.3% and 5.6%, respectively.
For the last survey period (ending June 2004), the largest raises
went to employees in construction and banking, says Dana Formánková,
a manager in PwC's human resources services, which prepares the
survey. While banks have traditionally paid well - Komerční banka
and ČSOB, with average salaries of CZK 33,800 and CZK 31,500, were
among the top six best-paying employers in a general survey (conducted
in October 2004) by Mladá fronta Dnes - construction companies
are increasingly upping their compensation levels, backed by a
continued boom in building. Larger increases should continue, if
major constructions companies like Skanska and Metrostav are any
indicator. Also in MfD's survey, these two firms report planned
pay raises between 6-7% in 2005. On average, companies taking part
in the PwC's survey - 112 mostly large, international companies
across most sectors of the economy - plan to increase salaries
by 5.2% this year, about twice as much as the current inflation
rate.
To be sure, salary differences remain, perhaps most notably between
Czech and international companies. "You still see a big difference
in pay in multinationals," says Scott Marlowe, country manager
for Hay Group, a consultancy that conducts another large salary
survey. According to Hay Group's findings, multinational companies
pay between 35%-58% more than Czech firms at the middle and top
management level. At about the same level are regional differences
between salaries in Prague and the rest of the country. According
to Ladislav Janoušek, Global Information Service Leader at Mercer
HR Consulting, "the highest difference is in salaries of financial
managers, which can reach 60%, average for all positions is about
30%. The lowest differences are for sales representatives and in
quality control."
There also are contrasts among sectors. Besides banks and telecoms
- Oskar, with an average salary of nearly CZK 50,000, topped MfD's
best-paying employer list - the pharmaceutical sector is one area
with salaries usually a fifth higher than average, according to
various surveys. The discrepancies between sectors is shrinking,
though. "The biggest trend is consolidation of salaries," says
Marlowe. "Five years ago, there were enormous differences
between sectors. The difference is much smaller now," he adds.
Typically, manufacturing is an area that pays less - 10% less,
according to PwC. This could change as investment in the sector
has put a strain on the labor market (see sidebar, p. 18). "There's
a growing need for people with specialized skills in manufacturing," says
Poulson of Job Shop. According to Žídek, filling positions like
plant manager or specialized engineers can be a tough job in itself.
Dana Formánková |
Equal pay
Looking closer at employers, Žídek notes that the salary for a
given position across a sector is more or less the same, with
only slight variances. Likewise, consultants claim that companies
are working more at pay equality between different departments. "There's
a drive towards internal equity," says Marlowe from the
Hay Group. At Glaxo-Smith-Kline, HR director Jana Byczkowská
confirms this. Although market level and employee performance
get precedence, she points out that, "we now look at internal
equity when doing salary reviews." Many companies now employ
compensation and benefit managers, whose job is to monitor pay
issues, including a nominal salary scale. Companies will have
their work cut out for them, however, as PwC finds the gap between
departments is actually growing. "Significant differences
can be found among managers and directors. Eight years ago, the
difference among the average monthly salaries of department managers
was CZK 20,000 maximum, now it is about CZK 50,000," says
Martina Štěpinová, one of the authors of PwC's Pay Well study.
In 1996, the losers were HR directors, while the winners were
sales directors. The latter have stayed at the top, earning 10%
more than a financial director; technical directors now have
the lowest salaries among management. Other supporting managers
- like HR and marketing - are also slightly below sales and finance
managers.
Compensation above and beyond salary, however, is starting to take
a more leading role in recruitment and retention. "Benefits
are becoming a big issue. Employees are not looking for [average
benefits]," says Lucie Bayer, director of the recruitment
firm May Consulting. Poulson, from Job Shop, agrees. "Many
benefits have been taken for granted," he says. "Some
are seen as givens." These include meal allowances and working
tools like a car, notebook, or telephone, and even an extra week
holiday - although interestingly, in PwC's HR survey from 2004,
90% of respondents said their managers weren't able to fully use
this perk as a result of being too busy. "At a management
level, a telephone isn't even a benefit anymore," says PwC's
Formánková, underlining the "routine" aspect of this
one-time extra. Understandably, benefits which bring a tax advantage
are also common now, and a number of employers have introduced
financial (pension and life insurance) and healthcare benefits
in recent years.
"
Financial and healthcare are long-term benefits, which ensure a
certain level of security and are future-oriented," says Štepánka
Doležalová, HR director at Linklaters, a law firm that has introduced
benefits in these areas over the past few years. At Česká pojišťovna,
as well, the emphasis is being put on this. "We are moving
from smaller perks to investment benefits," says spokesman
Václav Bálek, adding that the move is better in the long run. This
is basically repeating what employees and job-seekers are saying. "What
we hear [from job candidates] now is much more about job security,
employers' market position and future plans," Bayer says.
This also follows a trend of employers using benefits more wisely. "Companies
before were doing benefits in a piecemeal fashion," says Marlowe,
usually introducing something only for tax reasons. "A lot
of companies were offering a lot of small benefits but found it
was adding costs. They are looking at it more strategically now," he
adds.
Petr Žídek |
Freedom of choice
Another development is the now common practice of companies tracking
the use of benefits. At Johnson & Johnson they've found 70%
of employees take full-advantage of the benefits offered. They've
even enacted changes based on such findings. "We used to pay
the full amount for language lessons, but we found that not all
employees were really going," says HR director Eva Snopková,
adding they adjusted by turning to co-payments. At ČSOB, the benefits
program was reassessed a few years ago. According to HR director
Přemysl Štenc, the survey found different results according to
age and location. These included the (arguably obvious) trend for
younger employees to be more interested in sports and educational
benefits (language and computer courses), while older employees
were concerned primarily with cultural and health benefits. Interestingly,
however, was that pension schemes received more interest from younger
employees. While it's difficult to please all employees, ČSOB -
like a number of other companies - started using a cafeteria-style
program of benefits in 2003. The system, which is gaining popularity
(see sidebar, p. 22), basically gives employees a budget and allows
them to choose their own benefits.
Cafeteria-style benefits are also a better way to track employee
benefit preferences, helping keep employees in one place. "This
is a more sophisticated aspect of retaining people," says
Irena Brichta, general director at consultancy Hudson. While employees
generally choose their benefits online, the system is getting easier
- and more mobile. A new addition is giving employees a payment
card to fund their benefits. "I see a big future for the wide-use
of these cards," says Václav Kouřim, HR director at pharmaceutical
AstraZeneca, which has used the system for two years. "You
can have your budget with you and pay wherever there is a terminal."
Employers are also getting more sophisticated in terms of paying
out bonuses. Martina Mastná, a consultant from Hill International
recruitment agency, confirms that the "year-to-year increase
in salary is becoming lower, while companies tend to motivate employees
by improved bonus systems." The typical 13th salary is becoming
a thing of the past, with PwC reporting its use in only 40% of
companies. "It's being redesigned to link it to performance," Formánková
says. Most companies are now working with performance-based awards
- nearly nine out of 10, according to PwC. But saying is a lot
different than doing, and a lot of companies have needed to improve
their system (see sidebar below). "It has been mismanaged," says
Marlowe at Hay Group. "Bonus percentages are a smaller part
of salaries, but that money is tied much more to performance now."
|
Base salary for selected positions
| Job description |
Base gross monthly
salary in CZK |
| |
lower quartile*** |
median*** |
upper quartile*** |
| Head of Sales and Marketing |
128 000 |
158 000 |
220 000 |
| Marketing Manager * |
79 000 |
93 000 |
118 000 |
| Sales Manager * |
70 000 |
84 000 |
96 000 |
| Finance Manager * |
47 000 |
77 000 |
103 000 |
| Key Account Manager |
58 000 |
67 600 |
80 000 |
| HR Manager * |
41 000 |
61 000 |
92 000 |
| Production Manager * |
33 000 |
46 000 |
62 000 |
| Brand Manager |
34 600 |
39 800 |
50 300 |
| Senior Accountant |
28 400 |
37 000 |
46 200 |
| Analyst Programmer |
25 300 |
34 000 |
43 200 |
| Production Line Supervisor |
25 000 |
30 000 |
34 700 |
| Market Analyst |
24 000 |
29 000 |
32 500 |
| Network Administrator |
21 200 |
26 400 |
30 000 |
| Personal Administration Officer |
21 400 |
24 800 |
29 700 |
| Warehouse Supervisor |
21 700 |
24 200 |
30 300 |
| Accountant |
19 700 |
23 800 |
29 000 |
| Process Engineer |
20 700 |
23 800 |
26 100 |
| Sales Representative ** |
14 100 |
20 800 |
23 900 |
| Secretary |
15 800 |
19 000 |
21 500 |
* these positions report to the
head of the respective department
**
another cca 30% of salary is in the form of variable pay
or sales incentives; variable part for other positions is
significantly lower
*** quartiles are dividing the observations
into four
equally sized files, e.g. within the lower quartile lies
the lowest 25%, above it is the rest; with the median dividing
the file into
two equal parts
Source: Total Remuneration Survey (TRS) 2004, Mercer Human
Resource Consulting, a.s. |
|
Production under pressure
Lucie Bayer |
|
The number of new investments setting up in recent
years have helped the job market - even causing labor shortages
in some areas - but typically haven't had much effect on
salaries. It's no surprise, as lower wages is one of the
investment incentives the Czech Republic offers.
Manufacturers continue to begin operations in the country,
obviously, outside of Prague where salaries are generally
lower - with the exception of central Bohemia. The expansion
has caused some holes in the job market. "The market
has undergone a lot of change and has put pressure on the
labor supply," says Robert Poulson, head of Job Shop,
a recruitment agency, mentioning positions like quality or
production managers. This has caused recruiters to expand
their networks. "On the agency side we had very few
recruiters in the regions a couple of years ago, and most
of the suppliers had hardly any specialization," says
Lucie Bayer, director of May Consulting. "Now we have
a network based all over the republic."
Of course, the difficulty of filling positions is quite natural. "If
you look at any new company arriving in the past 12 months,
you'll see that there will always be problems to fill some
positions," says Irena Brichta, director at the consultancy
Hudson. She uses the example of companies working to fill
supply-chain management positions a few years ago, which
was relatively new then. "There's a limited universe
[for these positions]," she says. Brichta explains that
it's also a question of whether candidates are motivated
to change jobs. In the field of manufacturing, this could
even mean moving house. "Some manufacturing companies
are providing housing allowances and are very successful
with this," Bayer says.
Another area of new investments, outsourcing centers, is
also causing problems for recruiters to fill positions in,
for example, finance and accounting, according to Petr Žídek,
senior consultant at Synergie Recruitment. Job Shop's Poulson
agrees. "Such positions require specific skills, and
in combination with languages, they are even more difficult
to hire for," he says.
Jason Hovet, Petr Vykoukal |
|
IT fuels the market
Natálie Záhorská |
|
The number of new IT projects
- DHL chief among them - in Prague, as well as Brno, has
caused a labor shortage in the sector, creating a candidates'
market.
"Companies have to react much more quickly [in attracting
workers] than in the last few years," claims Nátalie
Záhorská, division manager for IT & Telco at Grafton.
Part of the reason is DHL's new European IT service center,
which started in Prague last September. Once the project
is finished, 1,000 IT positions will be filled. The project
is putting a big strain on the job market, and consultants
note that companies are losing employees to DHL. Hays, a
recruiter working with DHL, has even had to create a special
department for the center. "We don't have enough applicants," says
Zuzana Bobková, an IT consultant with Hays.
However, top specialists are doing better today even while
companies try to act more sensibly with salaries - trying
not to repeat the salary madness that the first IT boom brought
around the turn of the millennium. IT salaries remain high
with project managers or IT managers, for example, earning
between CZK 60,000 and CZK 100,000 or more. A new trend,
though, is more specialists turning to consulting and offering
their services to the highest bidder, according to Richard
Walker, senior consultant in charge of the IT division at
Synergie Recruitment. Furthermore, the market is seeing some
specialists head to western countries following EU expansion.
These developments promise a better negotiating position
for IT experts. "This year we'll probably see strong
upward pressure on salaries," Walker predicts.
More IT candidates are also looking at benefit packages. "Employers
have to attract new employees not only by a comparable or
higher salary," Grafton's Záhorská advises, "but
also by offering attractive jobs. For example, being able
to work on interesting projects where they could grow technically." More
training is one benefit - and sometimes necessary, since
(besides being in short supply) not all candidates have the
requisite skills. Záhorská points out that more companies
are now willing to train new and existing employees. All
of this is good news for graduates. "Companies are still
interested in hiring fresh grads with some IT experience
and are prepared to train them," Záhorská says, adding
that these "newly released" students are cheaper
for firms, as well.
Jason Hovet |
|
Managers' salaries - a public
matter?
Last year a new law on
capital market trading ended the age-old debate on whether
or not top managers' salaries should be published.
Thanks to the law, starting this year the income of heads
of firms whose shares are traded on the stock exchange are
public information. The annual reports of these companies
must show in detail the income of each manager and supervisory
board members. This new legal requirement won't cause much
enthusiasm among them. "I'm in favor of shareholders
knowing the total income of management members," says
Martin Roman, chairman of the board and general director
of ČEZ. "But I don't know if it's important to know
the amounts for individuals. This has no significance for
shareholders." Nevertheless, as Miroslav Ševčík, the
director of the Liberal Institute and chairman of the board
of Toma (whose shares are traded on the stock exchange),
points out, the income of statutory bodies of publicly-traded
firms are already public information. "These sums are
approved at general meetings, they're in the minutes and
on file at the Center for Securities and at the Commercial
Register," Ševčík says.
The main argument against detailed publication of managers' salaries is concern
about envy. In the past, publication of only estimates of some managers' salaries
caused problems, not directly for them but for their families and children in
school. According to Roman, a similar encroachment on privacy could lead to a "division" of
managers from society. "In the west, managers often have nearly no contact
with society. But so far Czech managers don't live in gated communities, their
children don't go to private schools. But I'm afraid that it will change precisely
because of this measure," Roman notes.
|
|
Pick your own benefits
Václav Kouřim |
|
As companies start working
to improve their use of benefits while keeping satisfaction
levels high, cafeteria-style programs are becoming increasingly
prevalent.
"Cafeteria-style benefit programs have become very
popular with employees in the last few years," says
Scott Marlowe, who has worked on remuneration issues in the
Czech Republic for seven years and was recently named country
manager at the consultancy Hay Group. Also Ladislav Janoušek,
Global Information Service Leader at Mercer HR Consulting
confirms that: "In 2003 only 8% of companies in our
survey were using cafeteria-style benefits, a year later
this number grew to 30%." This program, similar to flexible
benefits, basically gives employees the opportunity to pick
their own benefits.
Among pharmaceutical companies this has become quite common. "We
are already using the cafeteria system for the second year," says
Václav Kouřim, HR director at AstraZeneca. Employees are
given a list of benefits they can select from, such as supplementary
pension insurance, or education. In the system, everyone
is given a fixed annual budget and can allocate their benefits
online, where conditions are also listed, for example, the
law requiring a minimum 1% employee contribution to pension
insurance. "The system is perfect because workers can
select benefits according to their needs," Kouřim adds.
Employees at Glaxo-Smith-Kline also seem to appreciate the
program more, according to HR director, Jana Byczkowská. "This
system is more effective," she says. From an employers'
side, the system is valuable not only in cost savings but
also for tracking purposes, which both pharma companies mention. "You
then know which benefits are important to people and which
are not," says Byczkowská.
For all its advantages, "cafeteria style" isn't
an option used by everyone yet. "The majority of companies
are still not using it," Marlowe, from Hay Group, says.
According to Irena Brichta, director of the consulting firm
Hudson, "Not every company has either the time or strategic
priority to focus on this." Many companies spoken to
by The Prague Tribune, however, have it on their agenda. "We
are considering it," admits Ernst & Young HR director
Monika Vegh, adding that future benefits should "fit
individual employee needs."
Jason Hovet, Petr Vykoukal |
|
Earning one's rewards
Scott Marlowe |
|
At management levels,
nearly nine out of 10 companies pay performance-based awards,
according to PricewaterhouseCooper's (PwC) Pay Well 2004
survey.
Performance bonuses are also increasingly affecting companies'
support and administrative staffs, whereas it used to be
mainly a tool for management and sales teams - 73% of companies
now use these awards for support staff (up from 66% the year
before) and 65% use them with administration staff (61% in
2003). However, employees might see the way performance awards
are used change in coming years as companies try to make
the system more effective.
Scott Marlowe, the new country manager for Hay Group, a consultancy,
explains how his team recently helped a client move from
a system that rewarded employees based on both individual
and company performance. "This was considered de-motivating
as people often felt company performance was something they
couldn't influence," recounts Marlowe. He added that
employees feared some managers were "tougher" than
others at yearly reviews. "They moved to a system that
spent more effort setting targets each year," Marlowe
says, placing targets in three areas: financial, strategic
and personal development. The first is usually set by the
company, but the others come out of brainstorming sessions. "What
makes this good is the emphasis it puts on setting clear
targets at the beginning of the year," Marlowe believes.
It sounds simple, but it is most often those targets that
prove the hardest to measure. In Hay Group's example, the
target areas looked at short- and long-term success. As is
common in many international companies, financial targets
were handed down by the parent company. Personal development
goals, though, are one-on-one and concentrate on improving
an employee's strengths and weaknesses. With strategic targets,
the company focused on how it needed to change in the coming
years - to improve contact with partners and customers, in
this case - and what initiatives an individual department
could contribute. The good thing here, notes Marlowe, is
that management works as a team, which not only safeguards
company strategy but assures employees that targets and pay-outs
among departments are balanced.
In any performance pay system, transparency is key and employee
feedback should be done regularly throughout the year. Marlowe
also advises keeping the system simple. "The purpose
of the system is to give employees the feeling that they
can influence their own pay themselves through their actions,
and therefore to encourage certain types of behavior by rewarding
it," he says.
Jason Hovet |
|
