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Outlook for European Employees in 2007

European employees are unlikely to receive large base pay increases this year, but will benefit from more training and development opportunities, according to a survey by Mercer Human Resource Consulting. The survey of more than 430 companies in Europe, mostly multinationals, found that only 16% of respondents plan to increase their investment in base salary rises in 2007. In contrast, almost 6 in 10 (58%) say they will spend more money on training and career development initiatives for their staff.

Other aspects of employee rewards that will attract little extra investment this year are retirement and health-care benefits, with 16% and 20% of respondents saying they will spend more money on these benefits respectively. Instead, companies will invest more in annual cash bonuses (32%) and non-cash rewards (44%).

Paul O’Malley, principal at Mercer, said, “Many organizations are reluctant to invest more in base pay increases because they do not want to raise their fixed costs. By focusing on training, noncash rewards and bonuses, they retain the flexibility over their investments, and can ensure the highest rewards go to the top-performing employees.”

He added, “By investing in employees’ careers, companies can build the capabilities to fill crucial skill gaps internally, rather than go through the costly exercise of hiring new people. From an employee’s perspective, training and development opportunities are often of as much interest as the contents of a pay packet, if not more so.”

The survey found that 32% of participants plan to develop the talents of existing employees to fill skills gaps, while 24% are relying on new hires. The remaining participants will use a combination of the two.

Reward Challenges
Employers are most concerned about attracting and retaining talented employees over the next year, with 83% reporting that this was a very important issue. Differentiating rewards for high performers was ranked as the second biggest challenge, with 65% rating it very important. Only marginally less important were implementing reward strategies that underpin business goals and ensuring pay is linked to performance, rated very significant by 64% and 63% of companies respectively.

At the other end of the spectrum, just 11% of companies felt that adapting their employee rewards packages to meet the needs of an ageing workforce was an important challenge. Increasing the choice of benefits available to staff and responding to their preferences were also toward the bottom of the list of priorities, rated as very important by 16% of companies, respectively.

Mr. O’Malley commented, “It is surprising that companies are not more concerned about adapting their rewards programs to suit older workers. Many organizations rely heavily on the skills that their older, more experienced staff bring to the workplace, yet the rewards packages they offer do little to engage these employees." He added, “Offering more flexibility around benefit choices and working conditions can help attract and retain workers of all ages.”

Skills in Demand
People with sales and marketing skills are in the highest demand by European companies. The survey found that 23% of organizations were particularly looking for sales and marketing candidates compared to just 7% who were seeking to recruit in-house human resource professionals.

Engineering and information technology skills were found to be in demand by 16% and 15% of organizations respectively, while employees in operations and those with global business experience were placed at the top of the list by 14% of organizations, respectively. Only 11% reported that people in finance and administration were in greatest demand.

Mr. O’Malley said, “The sales and marketing function is the engine for growth in most companies. Employers know they have to offer compelling rewards packages to attract top-quality employees from the competition.”

For additional information on the Mercer European survey, please visit: www.mercerHR.com/ukpress