Skimpy Raises Now Part of Corporate Cost Cuts

December 12, 2001 ( - Merit salary increases will be particularly skimpy as 2001 draws to a close and companies scramble to cut HR costs, a Towers Perrin survey finds.

The obvious culprit: A weak economy and the continuing economic aftershocks of the September 11 terrorist attacks on the World Trade Center in New York City and the Pentagon in Washington, D.C.

For 2002, a majority of survey respondents (59%) said they were reducing their merit budgets for all categories of employees to increases of under 3.5%, compared with hikes of 4% or higher in 2001.

Towers Perrin HR Cost Management Survey: A Year-End Look, found that 84% of respondents named cost controls as a critical part of executing current business strategy. Meanwhile, 65% said it will also be on corporate executives’ minds in the future.

According to the study, executives will try to cut costs in:

  • health and welfare plans
  • recruiting
  • staffing
  • training and development.

Post 9/11

When asked whether their organization had changed its HR strategy after September 11, more than three-quarters (78%) of those responding said:

  • they were scrutinizing new hires more closely
  • background checks were getting a new look
  • safety and security were extremely important
  • employee assistance programs were getting increased resources.

Many respondents also said they were tightening travel costs, with one respondent saying that a 20% reduction in air travel had produced a “big difference on the bottom line.”

The Towers survey was conducted twice, both before (with 126 organizations responding) and after (with 143 organizations responding) September 11.