Companies Plan to Reinstate Some Programs Cut During the Economic Crisis

June 25, 2009

Majority expect to reverse hiring, salary freezes within 12 months.

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 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.

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 healthcare costs paid by the employee.

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.