Company News » Companies preserving staff benefits

According to a study of more than 2,000 companies across 90
countries conducted in May by
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

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

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.