Employee benefits tops the list of the pricing pressures that senior U.S. finance executives are most worried about, according to a survey by accounting and advisory firm Grant Thornton, conducted Sept. 21 through Oct. 2, 2009.
Fully 77 percent of the 846 participating U.S. CFOs and senior comptrollers are most concerned about the price of employee benefits—far higher than the 31 percent who cited business insurance costs and the 30 percent who most worry about the price of raw materials and energy.
Aligning with their concern about benefits pressures, 33 percent said their companies were taking steps to reduce average per-employee health care spending, and 26 percent were reducing matches of their employees' 401(k) contributions.
Compensation Concerns, Too
Regarding compensation, 55 percent of finance executives said their companies were scaling back bonuses, 42 percent were trimming salary raises, and 34 percent were decreasing stock options and other kinds of equity-based compensation.
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U.S. CFOs and Senior Comptrollers Were Asked: |
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About which type(s) of pricing pressures are you most concerned? (Check all that apply.) |
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Employee benefits (e.g., health care, pensions) |
77% |
|
Energy |
30% |
|
Raw materials (e.g., food, metals) |
30% |
|
Business insurance |
31% |
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Other |
14% |
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Is your company increasing or reducing average costs per employee in any of these employee benefit and compensation areas? (Check all that apply.) |
|
|
Increasing |
Reducing |
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401(k) match |
3% |
26% |
|
Bonuses |
7% |
55% |
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Disability benefits |
3% |
10% |
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Health care benefits |
7% |
33% |
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Life insurance benefits |
2% |
11% |
|
Salary raises |
9% |
42% |
|
Stock options and other forms of equity-based compensation |
6% |
34% |
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Source: Grant Thornton.
Percentages may not total 100 due to rounding. |
Overall, 31 percent of respondents are less worried about their organizations' ability to continue as a going concern than they were one year earlier, while just 24 percent are more worried and 45 percent report about the same level of anxiety.
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Two in Five U.S. Employers Believe Worst Is Over
A survey by the International Foundation of Employee Benefit Plans (IFEBP) shows U.S. employers adjusting to the recovery phase of the recession, and that most don’t anticipate making further pay, benefit or workforce cuts.
“The results of the September 2009 survey indicate that employers believe the economy is now working its way toward recovery and that the long-term effects of the financial crisis are not as severe as originally thought,” explains Sally Natchek, senior director of research at IFEBP. “At the same time, employers and employees have stepped up their efforts to reduce risk exposure in their retirement plans in hopes of a secure future.”
Survey results show that since the onset of the economic downturn in the last quarter of 2008, over half of employers (52 percent) have reduced their workforce or laid off employees, 49 percent have implemented a hiring freeze, 42 percent have frozen wages and 16 percent have reduced wages.
Now, however:
• 40 percent of respondents agree or strongly agree that the worst of the crisis is over; 27 percent disagree or strongly disagree with this statement, and 33 percent are neutral.
• A large majority of respondents (87 percent) agree that the path to economic recovery will be much slower than previous recessions.
Of the employers responding to the survey, just 3 percent said they plan to make layoffs in the next six months, only 2 percent expect to implement a hiring freeze, while 4 percent plan to freeze wages and 3 percent expect to reduce wages.
Although employers are optimistic they will not have to make more cuts, the vast majority, 90 percent, also do not expect to increase hiring in the next six months.
Retirement Plans Adjusted
Both defined benefit pension plan sponsors and defined contribution 401(k)-type plan sponsors have evaluated their retirement plans to ensure stability and reduce risk. IFEBP’s September 2009 survey found that as a direct result of the financial crisis:
• 42 percent of defined benefit plan sponsors revisited their asset allocation policies.
• 37 percent reviewed their actuarial assumption and plan design.
• 27 percent increased their risk management focus.
Defined contribution plan sponsors have reacted to the crisis by:
• Reviewing their fund lineup (28 percent).
• Adding more low-risk investment choices (26 percent).
• Increasing diversification (24 percent).
Responses to the survey were received from 850 individuals representing retirement plans in the United States. |
Stephen Miller is an online editor/manager for SHRM.
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