More Employers Plan to Reverse Pay and Benefit Cuts

August 13, 2009 ( - The number of employers planning to reverse salary cuts and freezes and reinstate a matching contribution to 401(k) plans has increased in the past two months, according to the latest update to an ongoing series of surveys by Watson Wyatt.

The survey found that 24% of employers plan to reverse reductions to 401(k) match contributions in the next six months, versus 5% in June, according to a press release. Additionally, 33% of employers that froze salaries plan to unfreeze them within the next six months, up from 17% two months ago.

Forty-four percent plan to roll back salary cuts in the next six months, compared with 30% who said so two months ago.

However, employers’ confidence in their business recovery does not translate to changes in other cost-cutting measures. The survey found that 66% of respondents that increased the percentage that employees pay for health care premiums do not expect to reverse that decision.

Also, 40% of respondents are planning to shift more health care benefit costs to workers by increasing the percentage of premiums they pay, and another 41% of companies expect to increase the deductibles, copays or out-of-pocket maximums for their 2010 health care plans.

While employers may be soon reinstating match contributions, the economy has had some long-term effects on worker retirements. According to the press release, looking ahead three to five years, 83% of employers surveyed expect to see an increase in the number of employees working longer, past their desired retirement ages.

More than a third of employers said they have noticed an increase in the number of employees taking hardship withdrawals (36%) and loans (37%) from their 401(k) and 403(b) plans in the last two months.

A majority of employers in the latest survey by Watson Wyatt (52%) are now more concerned about retaining their top performers and critical-skill employees than they were before the economic crisis hit. Forty-three percent of employers expect to see a reduction in staff sizes. Half also expect to see an increase in the difficulty of retaining critical-skill employees, and 46% in attracting them.

In an effort to keep employees engaged, 83% of employers said they have increased communication and 40% have held additional employee forums such as town halls or other interactive sessions to address economy-related concerns.

While almost half (47%) have changed employee roles to expand responsibilities, a far smaller number is expanding the use of recognition programs (27%) or creating special compensation programs for high-performing or at-risk employees (18%).

Watson Wyatt's latest bimonthly survey was conducted in August 2009 and includes responses from 175 large employers.

More information is at .