Hiring and Compensation Take the Recession Hit for Governments

August 24, 2009 (PLANSPONSOR.com) - A Segal Company survey finds that state and local governments have responded to the recession by changing hiring and pay practices rather than reducing benefits.

According to the survey results, 72% of governments surveyed have implemented a hiring freeze, and 56% have frozen pay. Just under half (47%) reported implementing a reduction in force, and 42% said they are requiring employees to pay more of their benefit costs.

Only 19% of the more than 80 governments responding said they have redesigned their retirement plan offerings in response to the recession. Twenty-one percent are offering an early retirement incentive.

The survey found many governments are taking multiple actions to reduce costs in the recession. About one-third (31%) indicated they are freezing pay and instituting a reduction in force, which Segal noted is like asking employees to do more work for the same pay.

Segal said the 23% that are implementing a pay freeze and requiring employees to pay a larger share of benefit costs are essentially cutting employees’ pay. Fifteen percent of governments are implementing a pay freeze, requiring employees to pay a higher share of benefit costs, and instituting a reduction in force. Segal likened this to asking employees to do more work for less pay.

Twelve percent of responding governments are not using any of the six strategies about which Segal asked.