Companies Planning to Reinstate Some Programs Cut During the Economic Crisis

Majority Expect to Reverse Hiring, Salary Freezes within 12 Months, Watson Wyatt Survey Finds 


WASHINGTON, June 22  /PRNewswire-FirstCall/ -- With signs that an economic recovery might be nearing, a majority of U.S. employers plan to reverse some, but not all, of the changes they've been making to their pay, benefits and other HR programs, according to the latest update to an ongoing series of surveys by Watson Wyatt, a leading global consulting firm.

The survey found that 62 percent of companies that have made hiring freezes and 69 percent of those that have made salary freezes plan to eliminate them within the next 12 months. Also, 48 percent that have reduced their employer 401(k)/403(b) matches plan to reinstate them in the same timeframe.

However, not all the changes made during the economic crisis will be rolled back. Although 60 percent of employers plan to reverse salary reductions (55 percent within the next year and 5 percent within 18 months), one in five employers (20 percent) will keep them in place, and another 20 percent are unsure. Nearly half (46 percent) do not plan to reverse the increases in the percentage that employees now pay for health care premiums. Watson Wyatt's latest survey was conducted in early June 2009 and includes responses from 179 employers.

"While more employers now feel the worst of the current downturn may be behind them, most are not expecting to go back to 'business as usual'," said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. "The challenge for companies will be to determine which cost-cutting changes can be reversed and which will become ingrained into the permanent business environment."

From a staffing perspective, in the next three to five years, more than half (52 percent) of companies surveyed expect that staff sizes will decrease from pre-economic crisis levels. Despite this expectation, more than two in five think that there will be long-term difficulties in attracting (41 percent) and retaining (45 percent) critical-skill employees. Furthermore, four in five (79 percent) of companies expect to see an increase in employees working past their desired retirement age, and almost three-quarters (73 percent) expect an increase in the percentage of health care costs paid by the employee.

  Changes companies expect in the next 3-5 years compared with pre-economic
  crisis levels

                                            Increase    No change  Decrease
  Employees working past their
   desired retirement age                     79%         18%          2%
  Percentage of health care costs
   paid by employee                           73%         24%          3%
  Difficulty retaining critical-skill
   employees                                  45%         45%         11%
  Difficulty attracting
   critical-skill employees                   41%         50%          9%
  Salary increase levels                      28%         45%         26%
  Staff sizes                                 22%         26%         52%
  Employer contributions to pension
   plan                                       10%         68%         22%
  Employer contributions to defined
   contribution plan - - e.g., 401(k)          7%         76%         17%



"Laying off workers and cutting back on pay and benefits are never easy decisions to make. Now, companies are now looking to the new economic landscape that lies ahead," said Laurie Bienstock, U.S. strategic rewards leader at Watson Wyatt. "The challenge for employers is to reassess short-term cost cuts and ensure they have the right workforce and resources in place to meet the organization's long-term financial goals."

  Other findings:
  --  Nearly one quarter (24 percent) of the companies surveyed believe
      their results have "bottomed out," approximately double the number of
      participants who thought so in April.
  --  The majority (82 percent) of companies that will reverse hiring
      freezes will do so only partially, and retain them for some locations
      or positions. However, 78 percent of those who expect to reverse a
      salary freeze will do so for all employees, and 78 percent of those
      who expect to reverse a salary reduction will restore salaries to
      original levels.
  --  Four in 10 companies (39 percent) will reverse at least some of their
      travel restrictions in the next 12 months or sooner.
  --  More than half (55 percent) of respondents noticed a decrease in
      participant contributions to 401(k) or 403(b) plans.



For more information, please visit http://www.watsonwyatt.com/hrprogramsJun09.

About Watson Wyatt Worldwide

Watson Wyatt (NYSE:WWNASDAQ:WW) is the trusted business partner to the world's leading organizations on people and financial issues. The firm's global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,700 associates in 34 countries and is located on the Web at http://www.watsonwyatt.com/. 

DATASOURCE: Watson Wyatt



CONTACT:  Ed Emerman, [phone], ; or Steve

Arnoff, [phone], , both for Watson Wyatt



Web Site:  http://www.watsonwyatt.com/ 

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