Salary expectations vs. company profits

Citation

(2000), "Salary expectations vs. company profits", Aircraft Engineering and Aerospace Technology, Vol. 72 No. 2. https://doi.org/10.1108/aeat.2000.12772baf.005

Salary expectations vs. company profits

Salary expectations vs. company profits

Keywords: Plimsoll, Employment, Equipment, Trends

The aviation equipment industry on the whole is employing fewer people than in 1998, according to the latest Plimsoll analysis. Plimsoll has determined that there has been as much as a 0.7 per cent decrease or around 2,767 jobs have been lost.

The recently published Plimsoll Portfolio Analysis found that 29 per cent, or 81 of the 278 companies analysed, have employed fewer people now than last year. In total, this accounts for about 16,984 jobs lost. However, more encouragingly, 54 per cent, or 150 of the companies analysed, employed more people over the last 12 months. This accounted for about 14,217 created jobs.

So what drives these changes each year? Obviously most companies are in business to create profits. But perhaps a key factor could be to get the right balance between average remuneration per employee and an employee's expectations of salary rises.

Average remuneration per employee

Plimsoll's analysis revealed that this year average salaries rose by an average of 3.7 per cent. Looking at the chart "Trend in average remuneration per employee" (Figure 1) currently the average remuneration per employee in the aviation equipment industry is just over £22,400. Whereas, the UK average remuneration per employee is £18,300. The average remuneration per employee is set to rise to on average just over £24,300 per person next year, which is almost £6,200 more per employee than in 1993.

However, each year it seems companies will have to dig deeper into their pockets to deliver the rewards acceptable to their employees to ensure that they retain the best people and reduce the risk of them jumping ship.

Figure 1 Trend in average remuneration per employee between 1993 and 2000

When and if this happens, which companies could afford to keep their best people? An acceptable business plan may be to set next year's costs in line with this year's sales, accepting a 0 per cent sales growth for next year.

Most interestingly, Plimsoll estimates 38 per cent of the industry would currently fall into losses matching next year's salary expectations against this year's sales. Unfortunately, some of these companies have an immediate problem as 13 per cent of the industry are currently already into losses.

So how credible is this scenario to accept a 0 per cent growth? Currently 31 per cent of the industry had zero growth in their latest performance.

Accepting the fact that owners and directors cannot allow these losses to happen, some companies will go for growth, some will shed jobs, but strategy, like company performance, is individual. Don Turkington, Managing Director of Plimsoll, says: For a company to move forward, they must, of course, look to increase sales or look inwards but they must keep salaries in perspective. Don't pay too much and don't pay too little.

Next year what is likely is that a significant number of people again will change jobs to other companies in the industry in the light of a company's need to respond to financial and commercial change. Indeed, it is estimated that, if those companies, either showing a decline in sales or under financial constraints, were to get their salary bills as a proportion of sales in line with the industry average of 30.2 per cent, as many as 3,455 more jobs would need to go. If history repeats itself, which it seems likely to do, then these people will need to find new jobs, almost certainly within the industry.

So, just how many companies in the aviation equipment industry have got the balance right? Plimsoll has revealed that last year 128 companies within the industry managed to increase their number of employees and increase sales, while managing to stay financially secure. A few of these "winners" are:

1. 1.

   BAC Express Airlines Ltd.

2. 2.

   Morganite Special Carbons Ltd.

3. 3.

   Aircraft Interior Refurbishment (Products Support) Ltd.

4. 4.

   Aircraft Maintenance Support Services Ltd.

5. 5.

   Ross Catherall Ceramics Ltd.

Conclusion

How many companies really do anything at all in this corporate tug of war between employees' salary expectations and their companies? If the old adage is true that "your company is only as good as its people", companies will want to not only afford to pay their employees next year but, more importantly, be able to afford their best employees. Considering profits are paramount in a healthy business, the balance between what is best for the company and the salary expectations of employees is a fine line for any "busy manager".

The Plimsoll analysis of the aviation equipment industry individually analyses company performance and evaluates the company through the latest four years of audited company accounts. The Plimsoll Model is a means to assess quickly the strengths and weaknesses of a company at a glance.

To order the Plimsoll Portfolio Analysis: Aviation Equipment, Autumn edition, 1999, containing 1,203 companies, including next day delivery for £305, call Jennifer Ovington on +44 (0)1642 257800. Mention this journal when ordering and you will receive a 5 per cent discount on the purchase price.