Bricks-and-Mortar Workers Lose Out

Pay equity is becoming an increasingly important issue for companies entering the e-space, according to a new e-commerce study by global consulting firm Mercer Cullen Egan Dell and executive search firm Korn/Ferry International.

The report - which examined 31 e-commerce related positions, with a 60:40 split between pure-play dot-coms and bricks-and-mortar companies that have added an e-component - identified tensions in many of the bricks-and-mortar companies in situations where e-commerce staff were working alongside their non e-commerce counterparts.

"E-commerce staff are generally better remunerated and provided with more flexible working conditions, leading to potential internal inequity," says Ilya Bonic, principal consultant at global consulting firm Mercer's Sydney office. "Bricks-and-mortar firms with an e-presence may well find themselves with a new management challenge - managing the expectations of two different types of employee."

Bonic says differences in e-commerce remuneration and work practices between both types of organisations are clearly evident, and will serve to encourage a labour market environment in which e-commerce professionals will have clear employment choices and remain highly sought after.

While e-commerce staff are increasingly gaining access to better pay and more flexible conditions, Bonic says anecdotes of widespread "pay gone mad" are not supported by the survey. "Rather, there are only isolated instances where 'pay whatever it takes' is being practised, even though it may be contrary to company policy," he says.

"The main difference between the two types of companies lies in the approach to salaries. The-bricks-and mortar firms are more likely to use a traditional market data approach to determine what salaries to pay their staff. The focus is on the position and the objective is to find out what other organisations are paying people in similar positions.

"The e-space firms, however, often have jobs that are more difficult to match to the external job market and are therefore more likely to tailor pay to the individual, with the individual's impact on organisational performance likely to be a key remuneration driver."

The expected annual pay increase for employees in the e-space, budgeted at 6.5 to 7 per cent, is also higher than that for traditional employees, which remains at between 5.5 and 6 per cent.

"It also appears that e-companies are forgoing the traditional pecking order mentality, with 50 per cent of those surveyed not differentiating between the pay of executives and other employees," Bonic says. "This could be indicative of a new team attitude, or because executive roles are likely to be less clearly defined in these still-young companies."

While there is not much differentiation in short-term incentives, such as annual bonuses, for staff of both types of firms, the e-companies are making long-term incentives more widely available, most likely in an attempt to get long-term commitments from their staff, according to Julie Perigo, Sydney principal of Korn/Ferry.

"While share option plans remain a common incentive in both types of companies, e-companies are also more flexible in this regard," says Perigo. "Vesting periods for long-term incentives among the e-space firms tend to be shorter than in the bricks-and-mortar firms.

"Because e-space firms are characterised by businesses in their early stages, executive salaries are often capped," she explains. "Earlier long-term incentive vesting periods thus provide scope for balancing reward, maintaining salary package competitiveness, and allowing executives to realise the gains from their efforts in building the business during its growth phase."

While the April dot-com stock correction may have served as a watershed event for reassessing staff levels, Perigo reports that it has not had a widespread impact on pay structures for e-space or bricks-and-mortar firms.

"Bricks-and-mortar firms," she says, "have been able to buy time in dealing with staff retention issues. For example, the high-tech stock market volatility has made a number of employees who were planning to move across to internet companies reconsider this option. For e-space firms, the stock market volatility reminded employees of the business risk associated with new ventures, serving to moderate remuneration increase expectations."

According to Perigo and Bonic, attracting and retaining e-commerce staff with the right mix of skills is the predominant issue for both types of companies. "Significant energy is thus being invested on attraction strategies," says Perigo. "But with e-commerce still in its infancy in Australia, many firms are still feeling their way in determining the most effective ways to manage their human resources issues in a climate of growth and relative uncertainty. And, in many cases, in the absence of market information."

Consulting firm Deloitte Touche Tohmatsu agrees that there's a way to go before the boundaries of the new working world are defined. The company expects a raft of new options to be issued. Many companies, it says, will also have to re-evaluate employee option schemes if they hope to retain and attract talented staff, in view of ongoing and often dramatic drops in tech companies' share prices, and following the review of business taxation reforms.

Meanwhile, Tony Nash, managing director of online recruitment company Best People International, believes that companies in the e-space will continue to struggle to find talented staff. According to a recent survey, he says, the larger, long-established computer companies remain popular options for workers still attracted by good infrastructure processes and policies, such as staff training, healthy working environments, and other more traditional benefits.

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