Wage Issues

Despite some early signs of economic stabilization and growth, the issue of wage restoration may be on the cards. During the crisis, there were elevated concerns over job security and losses that led to an increased in employees’ willingness to accept lower settlements for wages – be they wage cut or freeze. With some visibilities on the horizon, job creation has intensified and unemployment has shown signs of dipping but the growth spurts may not immediately translate to wage restoration. Typically, it may take 2-3 quarters of lag from the inception of real growth before wage will see restoration.



With improving times, it is not just heartless but pernicious to assume that companies will not have a reversal on wage freeze and restraints. The real crux is fairness. Only a demonstrably fair approach like keeping retrenchment to a low or belt tightening with wage cuts and restraints is likely to have the broad support that will turn the company around. When profitability returns and when there is no ineffective response, then it is unfair to everyone. Companies have little choice then but to reverse their competitive decline through wage restraint and improved productivity.



The more optimistic forecasts that are beginning to appear are indeed predicated on such a rapid restoration of companies’ ability to compete effectively and productively and hence a similar restoration of employees’ wages of pre-recession level.



This is a time where the management cannot abdicate their leadership opportunities by letting bean counters lead the company's charge through these times. Shortsightedness will not give the companies any latitude to retain good employees. When the tide rises, companies must engage the workforce, promote productivity and retain loyal and motivated employees for the long haul and that will mean a review of the compensation to ensure that everyone on the boat, who have withstood the test of times and have shown resilience and effectiveness, rise with the high tide.