Compensation Strategy in Recession

The compensation strategy can be under a huge pressure in the recession. The top management sees a great opportunity to realize significant cost savings resulting from lower base salaries offered to the new employees.

The compensation strategy should not be that flexible as it can breach the internal equity and the external equity can quickly change too. The internal equity is always a good goal for compensation and benefits and it is a real long term goal. The recession should not break such a goal and the organization has to identify other areas for cost cutting, not the compensation strategy and the compensation policy.

The compensation strategy is very expensive and the quick change in the middle of the implementation can cost huge money. The organization can realize short term cost savings, but the costs in the future is enormous. The HR invests money into bringing the internal equity and the simple solution can break the whole effort.

The compensation strategy cannot be changed easily and the recession is not a good decision moment. The recession can show, if the compensation strategy works, it is not a good moment to cancel the current compensation policy.