More Employers Plan to Reverse Pay and Benefit Cuts

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 www.watsonwyatt.com/hrprogramsAug09 .