The media are increasingly featuring reports of companies that, due to the recession, are letting employees go. For many, there is no other alternative besides layoffs in order to salvage the business. For other organizations that still have options, all items on the HR budget are coming under scrutiny. Fortunately, there are ways of belt-tightening without job losses.
Certainly, layoffs are a last resort, as no employer wants to let workers go. Moreover, aside from the compassionate aspect, there is a real downside to layoffs. When the economy does recover, organizations may find themselves without the skilled labour they need to handle increased business. In addition, the “survivor’s guilt” experienced by those who have kept their jobs, as well as the loss of morale, may persuade those who are still on the payroll to look elsewhere for a position.
Choose Where to Cut
Employers recognize the negative side of layoffs. In a recent Hewitt Associates’ Rapid Response survey of 192 Canadian organizations, 57% of respondents indicated that they did not expect to implement layoffs within the next year, while another 12% didn’t know what the future held. However, all respondents were certainly looking at other means to keep HR costs in check:
• 47% already have or expect to have hiring freezes in place within the next 12 months;
• 53% have cut back on their recruitment efforts, or plan to do so over the coming year; and,
• at the same time, 80% of employers have no intention of providing incentives to encourage employees to retire early. It would seem that organizations are keeping an eye on the future, ensuring they’ll have the skills they’ll need.
Hardest hit in the HR budget is discretionary spending. Fifty-eight percent of organizations are planning either slight or significant reductions in business travel, and 32% will cut back on expenses related to holiday celebrations.
Reduce Administrative Costs, Not Benefits
One area that will escape the chopping block virtually unscathed is benefits programs. Eighty percent of respondents have no plans to reduce their medical, dental and disability benefits plans, and some employers are even planning to improve their programs. Organizations are focused on using their HR dollars effectively by seeking low-cost ways to keep employees healthy. Benefits that improve employees’ overall well-being and help them manage stress—including health and wellness programs and coverage for paramedical services such as physiotherapy or massage therapy—are on the upswing.
While benefits programs will remain intact, that doesn’t mean that employers aren’t looking to cut back on benefits expenses. About one-quarter of respondents indicated that they are seeking a reduction in benefits insurers’ administration fees, commissions and outside supplier fees. Only about 11% plan to cut internal pension and benefits support staff.
Most retirees are no more likely to be affected by tighter HR budgets than others, according to the survey data. Only 5% of respondents plan to cut retiree benefits.
Something to Talk About
One finding from the survey that was quite surprising was the fact that so few organizations are communicating with their employees about the impact the recession is having on their workplace. One-third had no plans to communicate about the economic situation at all. Whether or not layoffs are planned, the silence is very likely causing employees to be apprehensive, decreasing their productivity and engagement.
Of those that are talking to staff, the majority are addressing general business issues, rather than specifics around benefits, pension and compensation. Again, this communication void is bound to raise questions in employees’ minds. Moreover, employers are missing an opportunity to explain their strategy and gain the support of the staff for cost-saving measures.
Despite the sombre statistics, Canadian organizations are focusing on using the HR budgets wisely, with a view to the future, before they resort to laying off employees.
Sarah Beech is managing principal, consulting, with Hewitt Associates in Canada. She has more than 20 years’ experience in the benefits industry, the last 16 with Hewitt.
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