F2 A MONTHLY LOOK AT THE FACTS AND FIGURES THAT IMPACT HR

AROUND THE WORLD

AUGUST 2012

Base Pay or Severance Pay? 1

By the Numbers 2

New Releases 3

Helping HR Create Optimal Global Compensation Strategies 4

Five Fast Facts 4

What’s Different About this Picture? 5

Expat Wellness Programme? 6

In this issue

Back issues of F2 and the Weekly Insighter are now available at www.imercer.com/newsstand.

BASE PAY OR SEVERANCE PAY?

A LOOK AT THE EUROPEAN LABOUR MARKETEurope – and the companies operating there – is at the epicentre of events as the world economy stands on the edge of another downturn. High sovereign debts, a credit crunch and an uneven recovery have severely affected the region’s economic activity, triggering the fear of double-dip recession.

A slower recovery not only hurts job creation, it can also lead the way to high unemployment. Based on what’s happening in the economy and its impact on their individual companies, HR managers need to be aware of mandatory severance pay statutes, as well as market practices. (continued on page 2)

BY THE NUMBERSUnemployment rates indicate a nation’s available, unused resources. Here are forecasts for the top 5 countries (among those analysed in the study) with the weakest job markets.

Source: Mercer’s Global Compensation Planning Report ( July 2012 update), International Monetary Fund (IMF) (2012 Forecast)

Spain 24.2%24.2% Serbia 23.9%23.9% South Africa 23.8%23.8%

Latvia15.5%15.5%Greece 19.4%19.4%

BASE PAY OR SEVERANCE PAY (CONTINUED)

WHAT’S HAPPENING IN THE LABOUR MARKETIn 2009–2011, Europe faced economic challenges that were characterised by uncertainty, high government debt, and weakening consumer and business confidence. It also witnessed pressure on currencies, leading to zero growth in most markets. Over time, the crisis spread from Greece, Ireland and Portugal to the rest of the continent.

As the situation worsened, more people started worrying about their jobs. The International Labour Organisation’s (ILO) Global Employment Trends 2012 report predicted that the developed countries in the European Union region will have 3 million more unemployed people in 2012 and 4 million more in 2013.

With unemployment casting a shadow over the region, employers struggle to find the right strategy to keep their organisations viable. The majority of participants in Mercer’s 2011 TRS are cautiously maintaining the same headcount in 2012, but employers in some countries are reducing headcount more than their peers in other countries. The following table provides a sample of the hiring outlook for struggling economies that reported the highest percentage of employers intending to reduce their workforce (2012 results, estimated in May-November 2011).

KEEPING AN EYE ON SEVERANCE POLICY AND LAW Severance pay represents the total pay and benefits package for employees who involuntarily leave an organisation. The inception of severance pay mandates varies based on a country’s developmental strategy; however, cultural and social differences have also led to variations in the level of these mandates and policies – not to mention, the cost to an employer. With the recent talent crunch making headlines, severance pay – as an indicator of an employer’s concern for employee welfare – has become a differentiating factor in attracting key talent.

The following key policy highlights – reported by Mercer’s 2012 Severance Pay around the World, the World Bank’s Doing Business Index 2012, ILO’s World of Work report, and various news sources – show trends in Europe:

• The majority of countries have a policy such that the company should notify a third party, even if a single worker is dismissed. However, third-party approval is not a requirement (except in the Netherlands, where even a single dismissal needs approval by the employee insurance agency). For collective dismissals, almost all governments require the company to notify unions and labour offices;

According to Mercer’s Total Remuneration Surveys (TRS, 2010 and 2011), 59% of European employers expressed a cautious approach to potential hiring freezes in 2011 and 2012. About 8% of participants foresaw a workforce reduction in 2011, which dropped to 6% this year.

Increasing Headcount (% participants)

No Change (% participants)

Reducing Headcount (% participants)

Belgium 33 54 13

Denmark 32 58 10

Greece 17 68 15

Italy 32 55 13

Portugal 11 77 12

Spain 22 62 15(continued on page 3)

MERCER SELECT GLOBAL INSIGHTS PREMIUM MEMBERSHIPSYour passport to worldwide HR data trends, analyses and news! Two annual memberships are available:

• PREMIUM COMPLETE = ALL Global Insights publications + Mercer Select news and analysis

• PREMIUM CUSTOM = 10 Global Insights publications + Mercer Select news and analysis

Both memberships provide a 25% discount off Global Insights prices and cover five individuals in the organisation. Learn more >>>

New ReleasesGLOBAL HR

FACTBOOK

GLOBAL

COMPENSATON

PLANNING

REPORT (JULY

EDITION)

Coming Soon

3|

most eastern European countries also require union approval before collective dismissals.

• Reassignment is an obligation in the majority of European countries.

• Although countries have laws to ensure employees receive severance, they typically base severance on the collective agreement – for example, Austrian employers contribute monthly to a fund for severance, while Belgium has no law binding companies to pay severance. Severance pay can vary from 0 days (Austria, Belgium, Denmark, Finland) to six months’ salary.

• Employees on paternity, maternity or temporary disability leave have protection against dismissal, while most countries provide additional compensation to dismissed employees nearing retirement age.

• Between 2008 and March 2012, 60% of central and southeastern European countries adopted a legislative change to reduce protection for permanent workers.

STAYING IN THE KNOW…The European economy continues its balancing act to improve growth rates by attracting investors while protecting employees from income loss. Given the high loss of capital, governments are trying to entice multinational employers to operate in their countries by improving labour laws and altering their protectionist stance. As the situation evolves, investors and HR personnel alike need to monitor economic changes and their impact on mandatory severance pay requirements. Learn more >>>

WORLDWIDE

SURVEY OF

INTERNATIONAL

ASSIGNMENT

POLICIES AND

PRACTICES

4 |

FIVE FAST FACTSWe take a closer look this month at findings from Mercer’s 2012 Global Compensation Planning Report ( July).

1 CORNER OFFICE DOING WELL The 2012 median base salary

increase for U.S. executives is 3%.

Learn more >>

2 TOO MANY WANT ADSThis year, Vietnam’s projected

unemployment rate is 4.5%.

Learn more >>

3 SKILLS IN HIDINGThe hardest skills to attract

in the Czech Republic are

marketing, sales and engineering.

Learn more >>

4 GOING UPThe UAE is experiencing a

1.5% inflation rate for 2012.

Learn more >>

5 READY, AIM… The median target bonus for

German sales professionals this

year is 10% of base pay. Learn more >>

HELPING HR CREATE OPTIMAL GLOBAL COMPENSATION STRATEGIES Mercer’s Global Compensation Planning Report (GCPR) offers a unique advantage to compensation planners, whether their organisation operates in one country or 100.

“GCPR has the complete data set that HR needs to make informed pay-planning decisions,” explains Niklaus Kobel, Mercer’s Geneva-based Product Manager for IPS Global Insights’ compensation publications. Most valuable? The salary increase forecast data by different career levels. HR uses this time-sensitive information to assess market trends and calculate their organisational budget for the year ahead.

A GLOBAL PERSPECTIVEKeeping up with world economic developments is challenging, particularly for HR staff who oversee multinational workforces. To provide a better understanding of the big picture, GCPR includes several years’ worth of data and trends on actual pay increase figures and forecasts, as well as variable bonuses.

This year’s report found that, even though economic growth is expected to accelerate somewhat next year across world regions, employers are still cautious with 2013 salaries. Western Europe is likely to show the lowest average pay increases, while Africa is reporting the highest.

The report also cites inflation, GDP and unemployment that influence the employment and salary outlook for workforces around the globe. As an added value, the report also provides information on turnover rates and in-demand skills that are difficult to attract and/or retain. “Knowing which jobs – and the career levels in those job families – pay a premium,” says Kobel, “allows managers to focus their strategy in the right direction.”

A TWO-TIER APPROACHTwo comprehensive GCPR editions are available every year in July and October. “The July release provides the initial forecasts for the coming year, which planners need to think about at the very start of the budgeting season,” Kobel points out. “And in the fall, when companies have a better idea of their pay increase strategy, the GCPR October update enables managers to re-assess their plans and fine-tune their budgets against the latest market trends.”

For practitioners who prefer more frequently updated information, GCPR offers an annual online subscription which includes time-saving, ready-to-use Excel downloads. Learn more >>

NOW AVAILABLE: GLOBAL INSIGHTS 2012 CATALOGUE UPDATE

Each year, Mercer’s Global Insights team produces a variety of in-depth reports aimed at helping clients address their global human capital issues. Our information products cover:

•Benefits

•Compensation

•Mobility

•HR Practices and Policies

Learn more >>

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12-IPSGIF2-NW_Aug_ExternalCopyright 2012 Mercer LLC. All rights reserved.

GLOBAL INSIGHTS F2August 2012 edition

Managing EditorStefani Baldwin

Senior WriterVirginia McMorrow

ContributorsDhanya ManghatDevi VeerapaneniNiklaus KobelPraveen Venugopal

DesignerAbhilash Prabhakaran

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ABOUT MERCER’S TALENT, REWARD & COMMUNICATIONThrough cutting-edge data trend analysis, Mercer’s TR&C helps organisations confidently and cost-effectively manage their talent around the world and expand their global footprint. Our in-depth information products cover all aspects of global HR management, from health benefits to retirement to compensation. Whether a client needs to benchmark its benefits against a competitor or requires customised data analysis to determine its next office location, our unique global perspective and access to key market intelligence can help them quickly address any global HR challenge.

To learn more about Mercer’s Talent, Reward & Communi-cation contact us.

EXPAT WELLNESS PROGRAMME?Although almost 40% of employers offer language training to an expatriate’s family members, 12% restrict this training to the employee only.

The benefit of being able to speak the native language of the host country is obvious. Language competency enhances the family’s ability to live and work effectively in a foreign country, justifying an investment of the organisation’s money.

In addition, many employers use cultural orientation firms to prepare employees and their families. Thorough orientation to the customs, values, traditions, and work and personal habits of the host society can increase an expatriate’s ability to work successfully with colleagues, as well as make family adjustments easier. Often conducted prior to departure, this training may continue abroad.

But such bilingual training sessions (and cultural insights) have other potential long-term benefits. For example, being bilingual may increase an individual’s resistance to dementia and Alzheimer’s, according to a study published in the New York Times.

Sources: Mercer’s 2011 Worldwide Survey of International Assignment Policies and Practices and the New York Times.

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