A recent Watson Wyatt survey found that 62% of companies that have made hiring freezes and 69% of those that have made salary freezes plan to eliminate them within the next 12 months. In addition, 48% that have reduced their employer retirement plan 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% of employers plan to reverse salary reductions-55% within the next year and 5% within 18 months-one in five employers will keep them in place, and another 20% are unsure. In addition, nearly half do not plan to reverse the increases that employees now pay in health care premiums.
"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," said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt.
From a staffing perspective, in the next three to five years, 52% of companies surveyed expect that staff sizes will decrease. Despite this expectation, more than two in five think that there will be long-term difficulties in attracting and retaining critical-skill employees. In addition, 79% of companies expect to see an increase in employees working past their desired retirement age, and almost 73% expect an increase in the percentage of health care costs paid by the employee.
"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."