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August 14, 2009
More Salary Freezes to Melt, but Healthcare Shifts to Stay at Most Employers

Thirty-three percent of employers that have frozen salaries plan to unfreeze them within the next 6 months, up from 17 percent who said the same 2 months ago, according to a survey by Watson Wyatt, a consulting firm.

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Meanwhile, 44 percent of employers that had cut salaries plan to reverse those cutbacks in the next 6 months, up from 30 percent who said the same 2 months ago. In addition, 24 percent of employers that reduced 401(k) matching contributions plan to restore them in the next 6 months, up from 5 percent in June.

“Some employers are seeing the light at the end of tunnel and feeling optimistic about the prospect of improved business results,” said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. “However, even as some of the program cuts are rolled back, many employees are facing smaller raises, lower bonuses, and higher healthcare costs.”

For example, the survey found that among employers that have increased the portion of healthcare premiums that employees must pay, 66 percent have no plans to reverse the decision. Also, 40 percent of respondents said they are planning to shift more healthcare benefit costs to workers by increasing the percentage of premiums they pay. Another 41 percent of companies expect to increase the deductibles, copays, or out-of-pocket maximums for their 2010 health care plans.

“Even as employers look ahead to an eventual economic recovery, they still face many challenges, such as the potential disengagement of top performers,” said Brian Wilkerson, global director of talent management at Watson Wyatt. “Employers can manage this to some extent not only by effectively communicating with employees, but also by ensuring that they are rewarded for the job that they do--in particular taking into account how that job might be changing in the current environment.”

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