Companies' Cost-Cutting Plans Slow in Anticipation of Eventual Recovery, Watson Wyatt Survey Finds
22 April 2009 - 5:42AM
PR Newswire (US)
WASHINGTON, April 21 /PRNewswire-FirstCall/ -- U.S. employers'
efforts to battle the recession through cost-cutting actions such
as layoffs, hiring freezes and salary freezes may have finally
peaked, according to an update to an ongoing series of surveys by
Watson Wyatt, a leading global consulting firm. According to the
survey, most companies surveyed are planning no further hiring
freezes (67 percent), organizational restructuring changes (65
percent) or layoffs (53 percent). Although the majority is not
planning any further salary reductions (89 percent) or salary
freezes (76 percent) in the next 12 months, the number that has
already made these changes has risen sharply since February.
Mandatory shutdowns (24 percent), a reduced workweek (22 percent)
and mandatory furloughs (17 percent) have also risen sharply since
February. The survey also found that only one in four employers (26
percent) plans to increase cost-cutting initiatives over the next
12 months, a sharp decline from the 51 percent planning more
cost-cutting measures in February. Watson Wyatt's latest survey
includes responses from 141 employers and was conducted in April
2009. "Companies have started to move into the next stage of their
cost-cutting actions, but are also looking ahead to an eventual
recovery," said Laura Sejen, global director of strategic rewards
consulting at Watson Wyatt. "There is a recognition that employers
will need to be poised for a turnaround, and that continuing some
cost-cutting measures such as reductions in force can put them at a
disadvantage once the economy improves." Majority of companies not
planning cost-cutting actions for the next 12 months Action
Planning change in Not planning change (%) next 12 months (%) Have
already Have Have not made already made change and made change do
not change yet but expect No and expect expect to to make changes
to do in next further made or so again 12 months changes expected
Layoffs/reductions in force 41% 5% 31% 22% Hiring freeze 29% 4% 43%
24% Organization-wide restructuring 24% 10% 25% 40% Salary freeze
17% 7% 43% 33% Reduced workweek 16% 4% 6% 75% Salary reductions 7%
4% 14% 75% Reduced employer 401(k)/403(b) match 4% 8% 18% 70% The
survey found that planned merit pay increases are expected to
remain at 2 percent in 2009, but will increase to 3 percent in
2010. Short-term incentive (STI) funding plans have not changed
drastically in the last two months either --- in February,
companies planned to fund their STI plans at 71 percent, compared
with 69 percent now. Only 17 percent of organizations took
cost-cutting measures to protect bonus pool funding. The number of
companies that report having reduced their 401(k) match has
increased by 10 percentage points, from 12 percent in February to
22 percent in April. There has also been a jump in the number of
hardship withdrawals from 401(k) plans --- 44 percent of
respondents in April noticed an increase in withdrawals, compared
with 35 percent in February. "Companies remain under great pressure
to reduce costs as the recession continues, and no one knows for
sure how long it will last," said Laurie Bienstock, U.S. strategic
rewards leader at Watson Wyatt. "While companies are planning for
eventual economic recovery, many still face having to make
difficult decisions that could affect workforce productivity,
future growth and ultimately their bottom line." Other findings: --
Companies continue to add or increase restrictions to company
travel policies and eliminate or reduce training --- the share of
companies implementing these measures has increased from 69 percent
to 77 percent of respondents (travel policy) and from 35 percent to
42 percent of respondents (training). -- For companies that have
already frozen salaries or plan to freeze salaries in the next 12
months, 58 percent will institute these changes across the board of
employees, while 36 percent will institute a freeze for only
certain employee populations. -- Thirty-one percent of companies
that have already reduced salaries plan to reinstate them by the
end of 2009. For those that have already reduced salaries, 37
percent plan to reinstate and build off them at the next merit
increase. To view the April report, "Effect of the Economy on HR
Programs," visit http://www.watsonwyatt.com/. About Watson Wyatt
Worldwide Watson Wyatt (NYSE:WWNASDAQ:WW) is the trusted business
partner to the world's leading organizations on people and
financial issues. The firm's global services include: managing the
cost and effectiveness of employee benefit programs; developing
attraction, retention and reward strategies; advising pension plan
sponsors and other institutions on optimal investment strategies;
providing strategic and financial advice to insurance and financial
services companies; and delivering related technology, outsourcing
and data services. Watson Wyatt has 7,700 associates in 33
countries and is located on the Web at http://www.watsonwyatt.com/.
DATASOURCE: Watson Wyatt CONTACT: Ed Emerman for Watson Wyatt,
+1-609-275-5162, ; or Steve Arnoff of Watson Wyatt,
+1-703-258-7634, Web Site: http://www.watsonwyatt.com/
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