WASHINGTON, D.C., October 23, 2008 — As the impact of the global economic crisis takes hold, a quarter of U.S. employers expect to make layoffs in the next 12 months. However, most companies are focusing on increased employee communication and smaller cost-saving measures, according to a survey by Watson Wyatt, a leading global consulting firm.
“Employers are still sorting out the impact of the economic crisis, but changes are clearly in the wind,” said Paul Platten, global practice director of Watson Wyatt’s human capital group. “As they respond to the new environment, companies will have to balance how to control costs, maintain employee morale and prepare for future staffing challenges.”
According to the survey of 248 companies conducted in mid-October 2008, more than one-third are planning to increase their communication around pay (37 percent) and benefits (35 percent). And roughly one of four is planning layoffs (26 percent), hiring freezes (25 percent) or raising employee contributions to health care plans (25 percent). While some companies also plan other changes, including travel restrictions, restructuring and reductions in training, relatively few expect to freeze salaries, reduce 401(k) matches or freeze or close their pension plan.
Employers are expecting to make staffing, pay and benefit changes in response to the financial crisis
|Actions||Have already taken||Will take in the next 12 months|
|Increase communication to employees about pay||18%||37%|
|Increase communication to employees about benefits||35%||35%|
|Layoffs/reduction in force||19%||26%|
|Raise employee contribution to health care premiums||21%||25%|
|Add/increase restrictions to company travel policy||34%||21%|
|HR function restructuring||15%||19%|
|Eliminate or reduce training||10%||18%|
|Eliminate or reduce the hiring of seasonal workers||17%||18%|
|Downgrade or cancel holiday party||19%||18%|
|Eliminate or reduce other employee programs||8%||11%|
|Close early retirement window||4%||5%|
|Reduce employer 401(k)/403(b) match||2%||4%|
|Freeze/close pension plans||11%||4%|
|Mandatory holiday shutdown||6%||2%|
Merit Increases and 401(k) Plans
Additionally, three out of 10 employers (28 percent) have reduced their merit pay budgets in the wake of recent financial developments. Of those employers that reduced their budgets, the projected raise is now 2.5 percent for 2009, down from 3.7 percent.
The survey also found that employees are making moves with their 401(k) plans. More than one-half of employers (53 percent) reported their employees are moving investments in their 401(k) plans out of equities. Also, about two in 10 employers (19 percent) reported more employees taking out plan loans, while slightly fewer (15 percent) reported an increase in hardship withdrawals.
“Employees are obviously concerned about the impact of the financial crisis as well, especially in relation to their 401(k) plans,” said Kathryn Yates, global director of communication consulting at Watson Wyatt. “Enhanced communication from employers in areas such as pay and benefits can go a long way toward easing some of that anxiety.”
For more information visit www.watsonwyatt.com/HRprogramsreport.
About Watson Wyatt
Watson Wyatt (NYSE, NASDAQ: 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 7,200 associates in 32 countries and is located on the Web at http://www.watsonwyatt.com.