Majority of companies drop pay rise, not staff, when cutting costs

Majority of companies drop pay rise, not staff, when cutting costs
Credit: Belga/ Virginie Lefour

Two recent surveys highlighted that SMEs (up to 250 employees) in Belgium, despite feeling increasingly negative about their economic prospects, are pulling out the stops to avoid staff redundancy.

The rising labour costs as a result of wage indexation, as well as the energy crisis and the various supply chain issues, have weighed heavily on businesses in Belgium, as a series of surveys carried out both within larger companies and SMEs have shown in recent months. Increasingly, these surveys are probing at what employers are doing to save costs as theirs are mounting.

In a previous survey carried out at the end of September, staff layoffs to save costs was a solution considered by one in six companies, with one in five SMEs (19.8%) noting they were replacing fewer or no employees when they leave the company. A survey published last week showed almost one in five Belgian companies are planning to cut staff next year.

However, Bernd Carette, Senior Manager at HR services provider Liantis Consult, did note that it remains unclear whether these intentions would actually translate into actual layoffs. "Possibly entrepreneurs are waiting to see how the economic situation will evolve further."

No shrinking workforce yet

Two surveys published on Wednesday highlighted that, at least among SMEs in Belgium, retaining staff is the key goal. More than eight in 10 Belgian SMEs do not expect their workforce to shrink in the first half of 2023, a survey by HR services group Acerta and employers' organisations ETION and VKW Limburg showed.

The same survey showed that, while the number of companies discussing negative economic prospects increased, the percentage of respondents foreseeing a decrease in the number of employees in the next six months has remained stable since the summer at 17%. "For many SMEs, eliminating labour shortages is just the priority of choice for the new year," the report read.

Meanwhile, a survey by HR services provider SD Worx showed that 13.50% of SMEs indicated they would be firing existing staff members.

No new hires and no bonuses

However, with the situation being as it is, SMEs are having to cut costs in some way. SD Worx's survey showed that Belgian SMEs prefer to hire less (40%), and not to give a salary supplement on top of the indexation of wages (60%).

This latter measure was also noted by Acerta earlier this month, which showed that, despite the unprecedented hardship currently faced by many Belgians, only 12% of SMEs intend to provide their employees with financial support over and above what is legally required from next year.

"Unfortunately, due to rising staff costs, salary mark-ups are only a realistic option for one in five (21.9%) SMEs," said Annelies Rottiers, SME advisor at SD Worx.

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Meanwhile, a quarter of SMEs is looking toward hiring fewer flexible workers or making fewer replacements when existing staff members leave. More drastic measures such as closing branches are also the least popular among SMEs.

Despite the financial hardships faced by many, both surveys highlighted that companies continue to focus on employee development, for instance through in-service training (which from 31 March will be mandatory for all companies with more than 20 employees as stipulated in the labour deal).

Many are also looking at other staff incentives such as team-building activities, making investments in the workplace, and flexibility in terms of working hours.

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