Companies’ cost-cutting plans slow in anticipation of eventual economic recovery

Global News Briefs: United States — April 2009

According to new survey findings by Watson Wyatt, U.S. employers' efforts to battle the recession through cost-cutting actions such as layoffs, hiring freezes and salary freezes may have finally peaked.

Key Details

The main findings include:

• Most companies are planning no further hiring freezes (67 percent), organizational restructuring changes (65 percent) or layoffs (53 percent). Although the majority are not planning any further salary reductions (89 percent) or salary freezes (76 percent) in the next 12 months, the number that have already made these changes has risen sharply since February.
• Mandatory shutdowns (24 percent), a reduced workweek (22 percent) and mandatory furloughs (17 percent) have 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.
• 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.

Background

Watson Wyatt's survey included responses from 141 employers and was conducted in April 2009. This is the latest update to a series of surveys on how the current economic environment is affecting companies’ HR programs (staffing, pay, benefits, etc.).

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