Recession brings widespread HR changes

WASHINGTON, D.C., Dec. 29, 2008 — The number of companies implementing cost-cutting measures, including layoffs, hiring and salary freezes and smaller pay raises, has risen sharply in just two months, according to a new survey by Watson Wyatt, a global consulting firm.

Watson Wyatt’s latest survey found that more than one in five companies (23 percent) plan to make layoffs in the next 12 months, and almost two in five (39 percent) have already done so — a sharp increase from only 19 percent of companies who had done so in October. The number of companies with hiring freezes jumped from 30 percent in October to 47 percent this month, with an additional 18 percent planning a hiring freeze in the next 12 months. Furthermore, the number of companies that have already implemented salary freezes jumped from 4 percent in October to 13 percent currently.

The survey was conducted during the week of Dec. 8, 2008, and includes responses from 117 companies across a variety of industries.

“As the economic downturn has both broadened and deepened, companies in almost every industry can no longer stay the course,” said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. “The need to contain costs has resulted in stronger measures that are ultimately affecting more workers.”

Action	Change already made	Change planned in next 12 months
Add/increase restrictions in travel policy	48%	16%
Hiring freeze	47%	18%
Layoffs / reductions in force	39%	23%
Downgrade / cancel holiday party	35%	8%
Increase benefits communication	32%	35%
Eliminate / reduce seasonal workers	28%	16%
Organization-wide restructuring	23%	21%
Eliminate / reduce training	23%	18%
Raise employee contribution to health care premiums	20%	17%
Increase pay communication	16%	43%
HR function restructuring	14%	21%
Salary freeze	13%	19%
Mandatory holiday shutdown	13%	5%
Reduce / eliminate other employee programs	12%	12%
Salary reductions	5%	6%
Early retirement window	3%	6%
Reduce employer 401(k) / 403(b) match	3%	7%
Reduce workweek	2%	6%

Companies are taking a number of different actions to help them manage costs. Findings show that almost two-thirds of companies have already taken five or more of the actions in the table above.

“All indications are that 2009 will be a difficult year for both companies and ultimately employees,” said Sejen. “It will be up to employers to find an effective way to manage this challenge by balancing their financial situations with the likely impact on employee engagement.”

Other findings:

Those companies that have already made or are planning to make layoffs indicated that this strategy would affect approximately 5 percent of their employee population.
Sixty-one percent of employers reduced their planned merit increase for next year from 3.8 percent to 2.5 percent.
Almost six in ten employees (59 percent) have moved their 401(k) or 403(b) investment mix out of equities, compared with just over half (53 percent) in October.
The number of employees taking loans has jumped from 19 percent to 27 percent in the same period.
Short-term incentive funding has not changed substantially from October — from a median of 100 percent funded last year, current STI funds stand at 80 percent funded.

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