Employers Ease Up on Cost-Cutting

CU360
November 20, 2009 | COMMENTS

Tentative signs of a slow recovery are becoming more common—government reports, the stock market, and home sales. Consequently, employers' efforts to battle the recession through cost-cutting actions such as layoffs and salary freezes might have peaked. While some companies are still adopting measures such as salary and workweek reductions, cost-cutting plans are being scaled back in anticipation of a gradual recovery.

Only one in four employers plan to increase their cost-cutting initiatives through spring of 2010, according to a mid-year survey by Watson Wyatt. That's a sharp decline from the 51% that were planning more cost-cutting measures in February 2009. Many employers have adopted a wait-and-see attitude, allowing them to make decisions over the coming months as they get a better sense of how long their companies will continue to be affected by the downturn.

Surveyed companies are planning no further:

• Salary reductions (89%);
• Salary freezes (76%);
• Hiring freezes (67%);
• Organizational restructuring (65%); and
• Layoffs (53%).

"Companies have started to move into the next stage of their cost-cutting actions but are also looking ahead to an eventual recovery," says Laury Sejen, global director of strategic rewards consulting at Watson Wyatt. "There is a recognition that employers will need to be poised for a turnaround, and that continuing some cost-cutting measures such as workforce reductions can put them at a disadvantage once the economy improves."

"Even though companies are beginning to anticipate the end of the current downturn, they're still under great pressure to cut costs," says Laurie Bienstock, strategic rewards leader at Watson Wyatt. "For employers forced to make difficult decisions, such as reducing salaries, it would be beneficial to follow up with consistent communication to reassure employees through this last push."

"Make sure employees understand why these actions were taken and how their credit unions are handling the impact of the down economy," Beth Soltis, CUNA senior research analyst tells Credit Union Magazine. "This will keep morale up, engender job security, and assist retention efforts."

Nearly 40% of credit unions reported freezing wages during 2009—the highest level recorded during the more than 25 years CUNA has studied credit union compensation, according to CUNA's 2009-2010 Complete Credit Union Staff Salary Survey.

Trends to know

Layoffs were a harsh reality at many firms this year, but the really difficult work follows, according to HR Focus magazine. How can you make the most of your remaining employees, retain the best talent, and attract new talent where needed? Trends affecting the future workforce include:

• Sustainability, efficiency, and organizational design;
• Innovation, which becomes more important as competition increases;
• Industry consolidation, including internal consolidation of units, and mergers;
• Technical disruptions, including changes in how business is conducted on the Internet; and
• Demographics, including the wave of retiring baby boomers, and the different ways in which Generation Y does business compared with preceding generations.