Thursday, April 29, 2010
Many organizations are being cautious about reverting to pre-recession total rewards practices.
In a report covering 193 organizations compiled by Buck Consultants titled, “Retirement Plan Changes in a Period of Economic Uncertainty”, three quarters of respondents with defined benefit and over half of survey participants with defined contribution plans are uncertain if plan recessionary changes will be reversed. Commonly reported changes included freezing defined benefit participants' benefits at 2009 levels and reducing employer contributions to defined contribution plans. (https://www.bucksurveys.com/BuckSurveys/)
A biannual national survey of 496 U.S. CFOs and senior comptrollers conducted from March 22 through April 5, 2009, by Grant Thornton LLP found that over half of the survey’s respondents plan no change in salary levels, while almost one third plan decease and only 15% plan to increase salaries over the next six months.
In a related survey, the “6th annual Retirement Plan Survey”, by Grant Thornton LLP, Drinker Biddle & Reath LLP, and Plan Sponsor Advisors, one fourth of survey participants reported reduced contributions or elimination of the employer’s defined contribution plan match to reduce costs. A full half are uncertain if they will return to prior contribution levels in 2010 and one-third plan to remain at the lowered levels. (http://www.grantthornton.com/)
A Michigan State University’s report on 2009-2010 college graduate hiring practices found a decline of 40 percent within the last 12 months. The survey of more than 2,500 companies indicated that new hires are at their lowest level in decades. One bright spot is smaller companies under 500 employees are expected to increase college graduate hires 15 percent in the coming year. Regionally, the East Coast continues to experience job reductions. The Southwest from Texas west to California and northward along the West Coast is reporting an uptick in college graduate hiring, while the college job market is down in the mid-section of the country. (http://news.msu.edu/story/7116/)
The National Association for Business Economics (NABE) January Industry Survey reported that job reductions continue to decline, but slowly. A quarter of organizations reported cut-backs compared to 31% in the October 2009 survey, while those firms planning to add employees in the first half of 2010 rose to 29% from a prior 24%. William Strauss, at the Federal Reserve Bank of Chicago was quoted as saying, "NABE's January 2010 Industry Survey provides new evidence that the U.S. recovery from the Great Recession continues, albeit at a slow pace,". (http://www.nabe.com/publib/indsum.html)
With a slow and possibly prolonged recovery underway, it is expected that downward pressure on total rewards will continue. Exceptions can be expected in select and isolated regions, industries, and occupations as the recovery progresses. However, one possible outcome of the current downturn-recovery cycle is that a “jobless recovery” could occur, primarily in mid level white collar and professional jobs. This outcome would further decrease any demand for a return to pre-recessionary salary and benefit levels.
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