Administration September 10, 2001

Firms Implement Cost Cutting Measures

October 9, 2001 (PLANSPONSOR.com) - An urge to retain talent in a weak economy is forcing companies to seek alternatives to layoffs, a survey shows.
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According to the Prevalence of Layoffs and Layoff Alternatives Survey by WorldatWork and Center for Workforce Effectiveness,

  • almost half the sample reported experiencing layoffs in the past year,
  • a further 31% expect layoffs within the next six months, and
  • of those who have already conducted layoffs, 48% foresee another round of layoffs in the next six months.

Preserving Human Capital

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Close to three-quarters of the sample ranked the preservation of human capital as important or very important to upper management. And companies are using a number of cost reduction strategies as alternatives to axing jobs.

The survey found that:

  • a little over 40% of companies have implemented hiring freezes
  • 15% are considering doing so
  • rather than lay off employees, 18% are placing them on temporary assignments.

Compensation Cost Cutting

In addition,

  • almost 20% of the companies in the survey have reduced or suspended annual pay increases and bonuses/incentive pay, 
  • with 25% considering reducing or suspending pay increases, and
  • slightly less considering doing the same with bonuses/incentive pay.

Other strategies to cut compensation costs cited, were:

  • shorter workweeks
  • perquisite reductions
  • voluntary severance.

Other cost-reduction strategies, not related to compensation, listed by respondents were:

  • reduction or elimination of company travel, mentioned by 28%
  • reduction or suspension of  training and education budgets, cited by 10%, 
  • and changing employee health plans, listed by 11%.

The sample comprised 964 respondents.

– Camilla Klein                           editors@plansponsor.com

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