Many employers are frantically axing jobs in an effort to improve their bottom lines. Other companies are wielding a scalpel to whittle cost savings from employee perks. About half of companies -- 51% -- expect to increase their cost cutting this year and beyond, according to a recent survey.
Here's a look at where employers are likely to make cuts.
Jobs
Large employers began massive layoffs at the end of last year. As of the end of May, a record 14.5 million Americans are now unemployed, the highest number since record-keeping began in 1940. While the rate of costs has slowed since the beginning of the year, employers still shed 345,000 jobs in May, driving the unemployment rate to 9.4%, according to the U.S. Bureau of Labor Statistics.Analysts predict more layoffs are still to come.
Vacant positions
Companies are likely to institute multiple cost-saving measures in tandem. "No single action here is going to help companies weather the storm," says Laura Sejen, the global director of strategic rewards at consulting firm Watson Wyatt. "Companies are looking at the full array of cuts they might make, and I think they are pulling a number of these triggers."As an alternative or in addition to layoffs, companies will stop hiring people and leave vacant positions unfilled.
Health care
Premiums for employer-sponsored health insurance climbed to $12,680 annually for family coverage in 2008. Employees paid an average of $3,354 out of their paychecks to cover their share of the cost, according to a Kaiser Family Foundation survey of 2,832 companies."Health insurance is steadily becoming less comprehensive," says Kaiser President and CEO Drew Altman. "With rising deductibles, more and more people face a substantial amount out of pocket for their health care before their insurance fully kicks in."
About 18% of employees had deductibles of at least $1,000 last fall, up from 12% in 2007. And 24% of companies are planning to increase employee contributions to health insurance this year, Watson Wyatt found, on top of the 22% that already have.
Travel
Extravagant company travel may be a thing of the past in many industries. About 69% of companies have increased restrictions to their travel policies, Watson Wyatt found, and an additional 10% plan to do so soon.Some companies are cracking down on nonessential travel and increasing Internet and teleconferencing as an alternative to meetings in person. Many employees are also being encouraged or required to use public transportation for local trips and book economy flights for necessary travel.
Training
Helping employees to develop advanced skills usually helps the bottom line of a company. But on-the-job training is expensive and time-intensive, and immediate results are not always realized.About 35% of companies have reduced or eliminated training for employees, Watson Wyatt reported earlier this year, adding that 15% were planning to. Keeping your skills up to date on your own, however, could help keep you employed. (See "A survival guide for the unemployed.")
Parties
Most industries weren't feeling very jolly over the holidays. More than 35% of companies downgraded or canceled their holiday parties, Watson Wyatt reported.A handful of companies -- mostly manufacturers -- instituted mandatory holiday shutdowns to save on operating expenses. They're likely to do it this year as well.
Salaries
Workers accustomed to getting an annual cost-of-living raise may be out of luck this year. Forty-two percent of companies have already frozen salaries, and 14% more plan to, Watson Wyatt found."As a cost-saving measure, it can have a fairly significant impact in terms of managing increases in cost," says Sejen, of Watson Wyatt. "Typically, it would be for 12 months, and then the organization would revisit the decision."
Merit increases
Don't count on getting a large bonus or merit pay increase this year either.Approximately 69% of employers have reduced their merit pay budgets, Watson Wyatt found, the majority in the past two months. Among those employers, the average projected raise was 1.7% for 2009, down from 3.7% last year.
Pensions
Many companies no longer want to bear the burden of providing traditional pensions for employees. Sometimes companies stop allowing new employees to join the plan. Other companies promise to pay the benefits already accrued but don't allow workers to earn additional benefits.About 11% of companies had already frozen their pension plans by last fall, with an additional 4% planning to do so this year, Watson Wyatt reported. (See "10 warning signs of pension peril.")
401k matches
A wave of large companieshas stopped contributing to employees' 401k plans. The February survey found 12% of companies have reduced their 401k match, and an additional 12% said they plan to this year. (See "Is your 401k match on the chopping block?")"Whether or not your employer is able to match your contribution, it is still of the utmost importance for American workers to continue contributing," says Tom Ruggie, the founder and president of Ruggie Wealth Management in Tavares, Fla. (See "No 401k match? Save anyway.") "Investors must not forget that the compounding growth of a 401k over time will allow them to grow additional assets off of savings they continue to put in."
Many companies, including Ford and Charles Schwab, eliminated their 401k matches during the previous recession but reinstated them later when their bottom lines improved.
Perhaps employers will return these valuable benefits and perks after this downturn as well.