Companies preserving staff benefits

According to a study of more than 2,000 companies across 90 countries conducted in May by Mercer, nearly 60% expect to make more workforce reductions before the end of the year. However, most are unlikely to change their pension contributions or investment strategy for retirement plans. Many say they are examining lower-cost medical programmes or shifting some of the cost to employees rather than eliminating these benefits altogether.

Seventy-three percent of companies surveyed do not plan to reduce their contributions to defined benefit pensions, instead choosing to review overall fund line-ups (32%) or review investment and administrative fees (33%), deciding to action these by the close of 2009. Thirty-eight percent will change their investment strategy to reduce inherent risk rather than change their funding policy and only 16% say they are likely to cut back or stop accruals for the rest of the year.

The study provides evidence that companies are thinking more creatively about how to incentivise the workforce after wide-ranging, deep redundancy programmes.
Fifty-eight percent of companies say they would increase employee contributions to health and group benefit programmes in the remainder of 2009, while half say they would instigate cost-sharing with their staff and 41% will offer lower-cost plan options. Mercer added that 94% had not eliminated any existing health and group benefit schemes to control expenses and did not plan to change this in 2010.

It also found that most employers planned to freeze salaries at 2008 level for the rest of 2009, or stick to existing agreements that would see pay increase. There is not much difference between those who think their base pay budgets will increase in 2009 (31%), stay the same (33%) or decrease (36%), reflecting a surprising level of stability in pay despite prevailing economic uncertainty.

Rather than cutting rates of pay, Mercer found companies using flexible working or shorter working weeks with the appropriate reduction in pay as a way to control workforce cost. About 12% of companies asked say they would instill voluntary reductions in hours and a corresponding reduction in pay at some point in 2009 ¿ but interestingly, while 29% of manufacturing companies said they had started this, only 13% of finance and banking business had done the same.