With hopes that an economic recovery might be nearing, a majority of U.S. employers plan to reverse some, but not all, of the cuts they made to their pay and benefits programs, according to the latest survey update by consultancy Watson Wyatt, Effect of the Economic Crisis on HR Programs.
The survey, conducted in early June 2009, found that:
• 69 percent of U.S. companies that have made salary freezes plan to eliminate them within the next 12 months.
• 48 percent that have reduced their employer 401(k) or 403(b) matches plan to reinstate them within the same time frame.
However, not all the changes made during the economic crisis will be rolled back:
• Although 60 percent of employers plan to reverse salary reductions (55 percent within the next year and 5 percent within 18 months), one in five employers (20 percent) will keep them in place. Twenty percent are unsure.
• Nearly half (46 percent) do not plan to reverse the increases in the percentage that employees pay for health care premiums.
“While more employers now feel the worst of the current downturn may be behind them, most are not expecting to go back to ‘business as usual,’ ” says Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. “The challenge for companies will be to determine which cost-cutting changes can be reversed and which will become ingrained into the permanent business environment.”
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The challenge is determining “which cost-cutting changes
can be reversed and which will become ingrained
into the permanent business environment.”
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As companies look to an improved economic landscape that lies ahead, they should “reassess short-term cost cuts and ensure they have the right workforce and resources in place to meet the organization’s long-term financial goals,” adds Laurie Bienstock, U.S. strategic rewards leader at Watson Wyatt.
|
Changes companies expect in the next 3-5 years compared with pre-recession levels |
|
|
Increase |
No change |
Decrease |
|
Employees working past their desired retirement age |
79% |
18% |
2% |
|
Percentage of health care costs paid by employee |
73% |
24% |
3% |
|
Difficulty retaining critical-skill employees |
45% |
45% |
11% |
|
Difficulty attracting critical-skill employees |
41% |
50% |
9% |
|
Salary increase levels |
28% |
45% |
26% |
|
Staff sizes |
22% |
26% |
52% |
|
Employer contributions to pension plan |
10% |
68% |
22% |
|
Employer contributions to defined contribution plan—e.g., 401(k) |
7% |
76% |
17% |
|
Source: Watson Wyatt |
Among other survey findings:
• Nearly one-quarter (24 percent) of the companies surveyed believe their results have “bottomed out,” approximately double the number of participants who thought so two months earlier, in April 2009.
• The majority (78 percent) of those who expect to reverse a salary freeze will do so for all employees, and 78 percent of those who expect to reverse a salary reduction will restore salaries to original levels.
F• our in 10 companies (39 percent) will reverse at least some of their travel restrictions in the next 12 months.
• More than half (55 percent) of respondents noticed a decrease in participant contributions to 401(k) or 403(b) plans.
Stephen Miller is an online editor/manager for SHRM.
Related Articles:
Rewards Outlook: Deep Pay and Benefits Cuts Show Signs of Moderating, SHRM Online Compensation Discipline, June 2009
U.S. Companies Plan Pay Increases for Most Jobs, Pay Cuts for Some, SHRM Online Compensation Discipline, June 2009
Suspend the 401(k) Match? Issues to Weigh, Pitfalls to Avoid, SHRM Online Compensation Discipline, April 2009
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