The pay systems within the current financial and economic crisis

Abstract

To develop and maintain a pay system that rewards employees fairly in terms of their relative contribution to the organization, as well as one that provides competitive to the external labour market salaries and wages is not something that just happens by accident. Contrary, it involves implementation of various practices and procedures to enhance the achievement of companies’ strategies and overall business mission, vision and goals.

To achieve this, is even harder during the last two years, when companies had to face the impacts of a global financial and economic crisis. The forces within the business environment became even more severe than usual. The crisis has been characterized by reducing world trade flows, lower levels of export and imports, decreasing sales turnovers, low accessibility to financial resources and increasing cost of capital. Many companies in Europe as well as all over the world have fallen into an economic depression with strong trends of constantly reducing gross domestic product, deflation and increasing unemployment.

The aim of the current dissertation project is to explore the effects of the financial and economic crisis over currently implemented remuneration systems; and to investigate what actual changes in the compensation structures have been provoked by the impacts of the crisis and of course the motives toward these changes.

The research is done in various Bulgarian companies. It was found out that most of the factors, influencing a pay system, have been changed during the last two years in response to the impacts of the crisis; moreover 75% of the companies stated that they have revised their compensation policy in response to its effects. The research suggested that these changes include revision of job evaluation models: grouping of jobs according to their relevant worth and reduction in the assigned pay levels to these job groups; as well as a general trend of transition from fixed to variable pay structures. Apparently to a great extend it represents the managerial/employer/ point of view. However, to the level that it is possible I tried to include important employees’ perspectives as far as remuneration is a core element of employment relationship. Some important issues about change management have also been brought into discussion and argumentation.