More Plan to Unfreeze Salaries, Restore 401(k) Matches

By Stephen Miller Nov 2, 2009
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About half of all large U.S. companies that froze salaries for 2009 plan to unfreeze them for 2010, and over a third of companies that reduced 401(k) matching contributions plan to restore them, according to an October 2009 survey by consultancy Watson Wyatt. One reason for loosening their belts: 37 percent of companies think their financial setbacks have bottomed out, compared to 27 percent who thought so in August 2009.

Watson Wyatt's bimonthly survey was conducted in October 2009 and includes responses from 201 large U.S. employers. Overall, 56 percent of surveyed companies had instituted a salary freeze since the economic downturn began in 2008, and 25 percent had reduced their employer 401(k) match.

Raises Reinstated

According to the survey, more than half (54 percent) of employers that froze salaries plan to unfreeze them in the six months following October 2009, a sharp increase from the percentage of employees that earlier indicated they would thaw 2010 salaries.

Salary Thaw
Among U.S. employers that froze employee salaries for 2009, the following percentages indicated they planned to unfreeze compensation for 2010:

As of October 2009 survey

54%

As of August 2009 survey

33%

As of June 2009 survey

17%

Source: Watson Wyatt


Matches Make a Comeback

A growing number of surveyed employers are also planning to restore their 401(k) matching contributions in the six months following October 2009.

Re-Lit Matches
Among U.S. employers that reduced or suspended matching contributions to employee 401(k) accounts, the following percentages indicated they planned to restore matching contributions for 2010:

As of October 2009 survey

35%

As of August 2009 survey

24%

As of June 2009 survey

5%

Source: Watson Wyatt

For companies expecting to reinstate their 401(k) or 403(b) plan match:

70 percent will change it back to the original level.

13 percent will reinstate the match at a new, lower level.

17 percent will vary it by year, based on company profits.

"The general economic picture right now is definitely brighter than it was just a few months ago," says Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. "However, the recovery is uneven and most employers aren't fully convinced that the improvements they've seen are here to stay. While many plan to hire workers over the next few months, they remain concerned about their ability to attract and retain the right people."

Looking ahead three to five years, half (50 percent) of surveyed employers expect an increase in difficulty in attracting critical-skill employees, and 55 percent expect an increase in difficulty in retaining critical-skill employees.

Recognition Aids Retention

In light of the recession, 44 percent of employers have encouraged managers to make greater use of recognition plans. However, only 8 percent of these employers have seen managers actually increase their use of these plans to a significant or great extent.

"Despite the slow movement toward recovery, employers are still having to manage a shifting workforce as they balance selective hiring with continuing to make some layoffs," says Laurie Bienstock, U.S. strategic rewards leader at Watson Wyatt. "In this environment, it is no wonder that employers remain concerned about retaining their top talent. However, recognition programs and other plans that keep these employees engaged and motivated can create a key competitive advantage."

Less Holiday Cheer

On the down note, only 37 percent of employers plan to organize a holiday party in 2009, compared with 47 percent that organized one in 2008 and 70 percent in 2007. Two in five (41 percent) that are planning a holiday party have seen their budgets decrease.

Stephen Miller is an online editor/manager for SHRM.

Related Articles:

Salaries Looking Up, HR Magazine, October 2009

Compensation 2010: Answers to Tough Planning Questions, SHRM Online Compensation Discipline, September 2009

Lifting Pay Freezes, SHRM Tools and Templates, July 2009

Most Workers Underestimate Employer's Health Costs, but value 401(k) Matches, SHRM Online Compensation Discipline, March 2009

Quick Links:

SHRM Online Compensation Discipline

SHRM Salary Survey Directory

SHRM Compensation Data Center

SHRM Online Benefits Discipline

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