Recession Sends Employers Into Strategic Mode

By Lydell C. Bridgeford
Employee Benefits News
April 21, 2009

Economic uncertainty serves as a catalyst for employers to both scale back and beef up their benefits programs, according to two new surveys by Towers Perrin and the Hay Group.

In February, Towers Perrin surveyed about 500 HR and benefits executives, and found that 56% of respondents believed that their company’s 2009 revenues will most likely decline. Despite the projections, 70% said their organizations have increased communication to address employee concerns about the economy, and more than 57% said they were not cutting back on investments in benefits communication or education.

Moreover, 53% of respondents are exploring new benefit strategies they would not have considered in the past, while 47% said they are taking a more holistic approach to reward management.

“It's encouraging that a majority of employers in this survey do not seem to let current concerns outweigh their long-term commitment to their employees,” says Mike Archer, Towers Perrin's chief actuary and a principal in the firm's retirement practice.

Meanwhile, the Hay Group reports that in Nov. 2008, only 19% of U.S. employers reported planning layoffs. Four months later, that number has jumped to 34%. The HR consulting firm surveyed about 2,000 organizations from 88 countries.

The Hay survey shows that training and development programs are being decreased or eliminated by 22% of U.S. respondents. Employers are also cutting overtime wages (21%) and the use of contract laborers (32%).

“Organizations in crisis mode often rush to cut costs through overly simplistic one-size-fits-all reductions in head counts and salary budgets,” says Tom McMullen, U.S. reward practice leader for Hay Group. “In these extraordinary times of economic uncertainty, organizations should take care to make contractions strategically and surgically to ensure that the talent base is still onboard and engaged when the economy turns around,” he adds.