Company layoff plans expected to decline, Watson Wyatt survey finds

A new update to an ongoing series of surveys conducted by Watson Wyatt, a leading global consulting firm, shows that most companies have already made most of their intended sweeping changes. However, many expect to make further cost-cutting changes this year, such as salary and hiring freezes, and reduced employer pension contributions.

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

said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt.

According to the survey of 245 large U.S. employers conducted last week, 52% have made layoffs, up from 39% two months ago. However, the number of companies planning layoffs has fallen 10 percentage points from 23% to 13%. Additionally, 56% now have a hiring freeze in effect, an increase from 47% in December's survey.

There has been a jump in the number of companies that have put into place other changes as well. These include salary freezes (up to 42% of respondents now from 13% in December's survey), reductions in employer pension contributions (up to 12% from 3%), a shortened workweek (up to 13% from 2%) and travel restrictions (up to 69% from 48%).

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 the majority of companies (61%) expect the current downturn in their performance to last at least until the end of 2009. Approximately half of companies (51%) plan to increase their cost-cutting actions in 2009 and beyond.

"As the business outlook remains challenging, employers are buckling down and making hard decisions," said Laurie Bienstock, U.S. strategic rewards leader at Watson Wyatt. "This may be good news as companies move more toward cost-cutting efforts other than workforce reductions in an effort to hold on to the workers they will need when recovery eventually comes."

Other findings from the survey include:
- Of those companies that have already made layoffs, 29% 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 pension 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% in December's survey), and 35% report an increase in the number of hardship withdrawals taken — more than doubling the December response of only 16%.
- Short-term incentive funding has not changed substantially since October — from a mean of 86% funded last year, current annual bonus pools stand at 71% funded.