Layoffs Expected to Decline

CU360
April 6, 2009 | COMMENTS

As the recession continues, companies are bracing for what could be a long period of economic hardship. But many firms have already made most of their sweeping changes, according to the consulting firm Watson Wyatt. Many, however, expect to make further cost-cutting changes this year, such as salary and hiring freezes and reduced 401(k) matching contributions.

"Companies have come to terms with the fact that this recession is going to last and they can't slash their way out of it," said Laura Sejen, global director of strategic rewards at Watson Wyatt. "Many companies are putting the drastic cuts behind them and are now focusing on smaller, more sustainable cost-cutting actions."

More than half (52%) of large U.S. employers have made layoffs, up from 39% two months ago. The number of companies planning layoffs, however, has fallen from 23% to 13%. Additionally, 56% now have a hiring freeze in effect, up from 47% in December's survey.

Other changes include salary freezes (up from 13% in December to 42% now), reductions in 401(k) matches (up from 3% to 12%), a shortened workweek (up from 2% to 13%), and travel restrictions (up from 48% to 69%). Planned merit increases are now 1.7%--less than half of what companies originally planned before the recession hit. Of the 69% who have revised their budgets, 58% did so in the last two months.

Survey results also show that 61% of companies expect the current downturn in their performance to last at least until the end of 2009, and approximately half of them plan to increase cost-cutting actions in 2009 and beyond. Cutting costs rather than reducing the workforce is an effort to hold on to workers who will be necessary when recovery eventually comes.

Other findings from the survey include:

• Nearly 30% of companies that have already made layoffs have offered enhanced severance benefits, such as extended benefits coverage, extended pay, or extended job search assistance.
• Since the economic crisis hit, 79% of respondents have noticed 401(k) or 403(b) participants changing their investment mix to move out of equities (up from 59% in December's survey), 45% have seen an increase in the number of loans taken (up from 27%), and 35% report an increase in the number of hardship withdrawals taken—more than doubling the December response of only 16%.