By Rita Avdiev…Property people are living in a state of uncertainty and fear. If they are still employed, they may face pay freezes, pay cuts and redundancies soon. If they have already lost their jobs they face fierce competition for any job available.
As detailed in the latest Avdiev Remuneration Report, the end of generous pay increases has come, with predictions of no rises for senior property securities executives and property consultants – architects, town planners, project managers and quantity surveyors.
Even with the new green consciousness in the property industry, consultants with sustainability credentials and experience are not immune from redundancy or pay freezes.
Despite proposed government infrastructure expenditure on health, education and community services, many architects and designers working for commercial design firms, whose big corporate clients were keen on green design in good times but have put their development plans on hold, have lost their jobs or face long term remuneration stagnation until the recession ends.
As architects, designers and town planners have traditionally been the lowest paid in the hierarchy of the property markets, this may force them to supplement their incomes again by driving taxis, just as they did in the recession we had to have in the early 1990s.
Property remuneration has been in retreat for a while. Increases in the 12 months to April 2009 only averaged 4.5 per cent, in contrast with 6 per cent for the previous year. Predictions for future increases range from 0 per cent to 3 per cent in the nine property market sectors surveyed.
Investment banks are setting the trend for pay cuts for those former financial wizards they have not made redundant. They have lost as much credibility and value as the derivatives they created, and now they are paying the price.
Some sectors of the property industry may follow, although not yet firmly committed to doing so. Companies may well find that, in deciding to refresh their teams, they will engage competent people below their current level of pay.
In this climate the unemployed accept remuneration well below their previous rewards. Our experience has been that executives negotiate up to 33 per cent less than their previous package in order to secure a steady job with a solid company which has a good balance sheet and reputation.
The global financial crisis continues to impact business activity for contributing companies, with 89 per cent reporting serious consequences in the next six months. This has a substantial flow on effect for their recruitment intentions. Around 58 per cent of companies surveyed have made positions redundant – 7.5 per cent of their work force with another 4.5 per cent to follow in the next six months. Also, key vacancies will not be filled by 58 per cent of companies. However, new positions will be created for desirable recruits but only by 9 per cent of companies.
- Annual increases to April 2009 averaged 4.5 per cent, down from 6 per cent
- Forecast increases for staff still employed average 2.5 per cent
- Redundancies in 58 per cent of companies shed 7.5 per cent of total workforce, 4.5 per cent more predicted
- Recruitment heavily impacted – but the fittest will survive.
Contributors report their main concern with current remuneration issues to be the need to restructure incentive payment schemes. Now that almost all companies have introduced an incentive scheme, they have found some
aspects not achieving the original objectives. To counter this, they have adopted a variety of solutions – reducing, removing or delaying incentives, eliminating long term incentive programs, restructuring bonuses and tying them closely to performance.
With the government stepping in to curb executive remuneration in publicly listed companies, we expect substantial changes in remuneration levels, composition and structures. As the recession begins to lift, a new generation of property owners, developers and their service providers will emerge. They will be lean, mean and hungry for market share and profit, and will work their people hard to achieve their goals.
Rita Avdiev is managing director of the Avdiev Group