"Variable Pay Programmes To Gain Significance In Rewards Strategy"

Although the recruitment and retention of skilled IT professionals continues to be a key issue for organisations, even under the current economic conditions, IT organisations will be cautious about their hiring plans in 2008 and 2009 in response to potential IT budget cuts, according to an annual survey by Gartner.

According to a survey of 285 US-based IT organisations, 57.9 percent projected an increase in IT staff levels (including full-time employees and contractors as supplementary staff) during the survey time period (March 1, 2008 through February 28, 2009). However, this is a notable drop from 66.3 percent reported in the 2007 study. At the same time, the survey also showed the percentage of organisations projecting a greater than 10 percent increase in head count also dropped from 15.7 percent in 2007 to 12.1 percent in 2008.

“Even though the number of vacancies and turnover rates remain at similar levels as 2007, organisations are being cautious in their hiring practices,” said Lily Mok, research vice president for Gartner’s CIO workforce management group. “We have not seen extreme measures being taken by IT organisations, such as hiring freezes, but we do expect to see enterprises take a more conservative and ‘wait-and-see’ approach to staffing for the rest of 2008.”

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The survey showed that the median employee-initiated turnover rate with retirements was 7.1 percent, down from 7.2 percent in 2007. The median voluntary turnover rate without retirements was 7 percent. IT organisations in other services, public, non-profit and manufacturing experienced more retirement-related turnover than other industries over the past 12 months.

The survey also showed that approximately two-thirds of participants don’t have a formal workforce planning process. “This reinforces our concern that IT organisations are not proactively planning for their workforce needs,” said Diane Berry, managing vice president for Gartner’s CIO workforce management group. “In addition to growing concerns about the economy and potential budget cuts, IT organisations are also faced with the challenge of a workforce demographic shift. This is a critical time for HR and IT leaders to start building a formal workforce plan that aligns with the IT strategic plan and proactively responds to market challenges.”

The survey showed that current economic conditions have yet to have a material impact on compensation budgets. Enterprises are continuing to budget for pay increases in 2008 at a level similar to previous years, with the reported median salary increase budget at 3.6 percent.

“We do see a relatively more conservative projection for 2009 across all sectors, with a budgeted median increase of 3.5 percent. Same budget amounts are reported for non-IT jobs for both years,” said Mok. “Cost-cutting measures, such as reduction in pay increases or pay increase freezes, affect the retention of high performers. IT organisations need to ensure they continue to reward and retain high performers through tough times so that they will have the right people when the economy improves. One way to achieve that is to differentiate the merit increase for your top performers versus average and low performers.” The survey indicates that the top 10 percent of performers in the IT workforce on average received from 3 to 4 percent more in base pay increases in 2007 than the bottom 10 percent performers.

Companies that know where to invest their dollars in which reward elements based on their workforce demographic compositions, and closely align their rewards strategies with those of the business and IT, will gain a competitive advantage over their peers in the marketplace in attracting and retaining desired IT talent.

“As organisations seek better ways to manage compensation costs while continuing to reward employees and drive superior performance, variable pay programmes will play an even greater role in the total rewards strategy,” said Mok. “This year, 81 percent of respondents reported having some type of short-term incentive/bonus programme(s) for IT.”