Benefits December 18, 2008

Staffing, Compensation Decisions Change Sharply Since October

December 18, 2008 (PLANSPONSOR.com) - The number of companies implementing layoffs, hiring and salary freezes, and smaller pay raises, has risen sharply in just two months, according to a new survey by Watson Wyatt.
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The survey found that over one in five companies (23%) plan to make layoffs in the next 12 months, and almost two in five (39%) have already done so – a sharp increase from only 19% of companies who had done so in October, according to a press release. The number of companies with hiring freezes jumped from 30% in October to 47% this month. Eighteen percent of companies plan a hiring freeze in the next 12 months.

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The number of companies that have implemented salary freezes jumped from 4% in October to 13% currently. Sixty-one percent of employers said they reduced their planned merit increase for next year from 3.8% to 2.5%.

Other cost-cutting actions cited by employers, according to the press release, include:

  • The addition or increase of restrictions in travel policies (48% have done so, 16% plan to in next 12 months);
  • A downgrade in or cancellation of office holiday parties (35% and 8%);
  • An increase in benefits communications (32% and 35%); and
  • Elimination or reduction of seasonal workers (28% and 17%).

Employee Moves

Watson Wyatt also found that as a result of the economic recession, almost six in ten employees (59%) have moved their 401(k) or 403(b) investment mix out of equities, compared with just over half (53%) in October. The number of employees taking loans jumped from 19% to 27% in the same period.

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