Trouble at the top

According to a new survey, organisations in the engineering sector are struggling to hold on to their employees, despite the frequency and value of bonus payments.

Organisations in the engineering sector are struggling to hold on to their employees, despite the frequency and value of bonus payments. The 2005 National Management Salary Survey also shows that benefits packages have improved as companies battle to attract staff.

The survey, launched by the Chartered Management Institute and Remuneration Economics, reveals that 61.7 per cent of executives in the engineering sector received a bonus in the year to January 2005. But in spite of the high number of people given bonus payments, 45.4 per cent of companies are reporting retention problems, the worst reported figure for 15 years.

Asked why their employees leave, nearly 62 per cent blamed competition from other organisations and 45.4 per cent admitted they offered little in the way of career progression or training. Salaries (43.2 per cent) and job security (40.9 per cent) were also cited as reasons for job changes.

The findings reveal that the average total earnings for managers in the engineering sector are £39,883, putting the sector fourth in the UK ‘earnings league table’. Managers’ salaries account for a large proportion of ‘guaranteed take home pay’ because at £3,803 for managers in engineering their bonus is worth 9.5 per cent of total income. Directors, in contrast, rely on bonuses for 38.6 per cent of total earnings. This differentiation is important as company and personal performance affect bonuses for 65.7 per cent of directors, compared to 56.2 per cent of managers.

The survey, of 20,989 individuals, also shows changes to the nature of benefits packages. Thirty years ago the norm was four weeks holiday per year, with 61 per cent taking 20 days. That figure is now 78 per cent, with executives taking between 21 and 25 days annual leave. ‘Signing on bonuses’ have almost doubled over the last year (to 14.1 per cent) and many businesses (51.4 per cent) offer ‘referral payments’ to staff recommending potential recruits.

There is clear evidence in this year’s survey that organisations are finding it difficult to attract staff. 43.4 per cent said they had experienced recruitment difficulties, up from 30.9 per cent last year. Of those companies facing recruitment problems, more than two-thirds (69 per cent) put them down to a lack of candidates with specialised skills, especially those in IT management, engineers and salespeople.

Mary Chapman, chief executive of the Chartered Management Institute, says: “The reported shortage of managers and staff with relevant skills is a concern because competitive advantage can be threatened if employees lack the ability to carry out their roles. Worse still, many organisations admit that they fail to provide adequate development initiatives, even though it is a major reason for leaving. If employers are serious about reversing the current recruitment and retention trend, they must address this issue and develop incentives that suit employees’ needs.”

In an effort to tackle the recruitment and retention problems, organisations are boosting their incentive schemes, with most (91 per cent) now giving cash alternatives to traditional perks.

Commenting on the findings in this year’s report, Paul Campfield, director of Remuneration Economics, says: “This year’s survey shows that movements in salaries have remained consistent to last year’s figures. However, the value and frequency of bonuses means that movements in overall earnings have changed significantly.”

Salaries for all managers in engineering rose by 3.3 per cent in 2005, against a national average of 4.3. Combined earnings rose by 3.5 per cent – the smallest sector rise in the UK, but they fared considerably better than directors in the same sector, whose earnings rose 0.9 per cent – the lowest UK movement.

In regional terms, managers in the South West gained the most in terms of combined earnings (up to 7.1 per cent increase) and those in the North West did least well (3 per cent increase).