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Benchmarking your cuts: How low can you go?

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in Hiring,HR Management,Human Resources

As the impact of the global financial crisis seeps into the roots of the American economy, employers and HR are being forced to make tough decisions.

So far, one-fifth of U.S. employers have instituted layoffs, and another 26% expect to shed jobs in the next 12 months, according to a survey by global consulting firm Watson Wyatt.

In mid-November, Citigroup Inc. announced plans to slash 50,000 jobs, the largest U.S. layoff announcement since 1993. General Motors suspended a variety of benefits programs for its white-collar workers, including its 401(k) match and tuition-assistance programs.  

“As they respond to the new environment, companies will have to balance how to control costs, maintain employee morale and prepare for future staffing challenges,” says Paul Platten, director of Watson Wyatt’s Human Capital Group.

According to the survey conducted in mid-October, 30% of employers have already instituted hiring freezes and another 25% plan to do so in the next year.

More than 35% of firms say they will restructure their organizations to cope with tighter cash flows. More than half are putting restrictions on employee travel.

Benefits programs are also taking a hit as employers look to cut costs. About half the companies surveyed will be asking employees to pay a larger share of health insurance premiums. Fifteen percent plan to place tighter restrictions on pension-plan participation. And 6% say they’re reducing employer match contributions for 401(k) and 403(b) retirement funds.

All this hunkering down means more work for HR—a function that will likely face its own challenges. In fact, 15% of survey respondents say they’ve already restructured their HR departments, and another 19% plan to do so in the coming year.

Being the bearer of all this bad news can dump profound stress on HR professionals, sometimes leading to health problems.

Communicate early and often

Almost any decision you make to cut staff or benefits will require clear and honest communication with employees. Seven out of 10 companies that Watson Wyatt surveyed said they plan to significantly increase efforts to explain staffing and benefits adjustments to employees.

If you’ve provided regular updates on your firm’s financial performance, bad news shouldn’t take employees by surprise. They may be upset by the news of layoffs, but they won’t feel blindsided.

Once you make the decision to lay off workers, don’t delay. It’s best to break the news early in the week and early in the day. Be concise and explain how the person’s layoff fits into the big picture.

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