Employers Ease Up on Cost-Cutting Measures

Credit Union Magazine
September 17, 2009 | COMMENTS

Tentative signs of a slow recovery are becoming more common—government reports, the stock market, and home sales. Consequently, employers' efforts to battle the recession through cost-cutting actions such as layoffs and salary freezes might have peaked. While some companies are still adopting measures such as salary and workweek reductions, cost-cutting plans are being scaled back in anticipation of a gradual recovery.

Only one in four employers plan to increase their cost-cutting initiatives through spring of 2010, according to an April survey by Watson Wyatt. That's a sharp decline from the 51% that were planning more cost-cutting measures in February 2009. Many employers have adopted a wait-and-see attitude, allowing them to make decisions over the coming months as they get a better sense of how long their companies will continue to be affected by the downturn.

Surveyed companies are planning:

• No further salary reductions (89%).
• No further salary freezes (76%).
• No further hiring freezes (67%).
• No further organizational restructuring changes (65%).
• No further layoffs (53%).

"Companies have started to move into the next stage of their cost-cutting actions but are also looking ahead to an eventual recovery," says Laury Sejen, global director of strategic rewards consulting at Watson Wyatt. "There is a recognition that employers will need to be poised for a turnaround, and that continuing some cost-cutting measures such as workforce reductions can put them at a disadvantage once the economy improves."

"Even though companies are beginning to anticipate the end of the current downturn, they're still under great pressure to cut costs," says Laurie Bienstock, strategic rewards leader at Watson Wyatt. "For employers forced to make difficult decisions, such as reducing salaries, it would be beneficial to follow up with consistent communication to reassure employees through this last push."

Credit unions cope

This year at GTE Federal Credit Union, Tampa, Fla., no employee will get a raise, promotion, or 401(k) match. Instead of layoffs, GTE Federal plans to eliminate 60 staff positions via attrition. Doing so will save the $2 billion credit union nearly $3.5 million, notes president/CEO Wendell "Bucky" Sebastian. Overall, he estimates the credit union cut $15 million in operating expenses in 2009.

GTE Federal's experience mirrors that of many credit unions nationwide, according to CUNA's 2009-2010 Complete Credit Union Staff Salary Survey. The nearly 40% of credit unions that plan to freeze wages during 2009 is the highest level recorded during the more than 25 years CUNA has studied credit union compensation, says Beth Soltis, CUNA senior research analyst.

"Make sure employees understand why these actions are being taken and how their credit unions are handling the impact of the down economy," says Soltis. "This will keep morale up, engender job security, and assist retention efforts."

For a look at how credit unions are rewarding their top performers with more than just base pay, see the September 2009 issue of Credit Union Magazine.

This article originally appeared on creditunionmagazine.com. Reprinted with permission.