As the impact of the global economic crisis takes hold, a quarter of large U.S. employers expect to make layoffs in the next 12 months. However, most companies are focusing on increased employee communication and smaller cost-saving measures, according to a survey by Watson Wyatt, a global consulting firm.
The steps being taken by large corporations surveyed by Watson Wyatt dovetail with what Main Street independent insurance agency owners say they are doing to cope with the financial crisis. Agents are less inclined to halt their hiring, but they are busy cutting unnecessary spending, according to an online survey by Insurance Journal.
All businesses, big and small, appear to be taking measured rather than extreme approaches to the crisis.
“Employers are still sorting out the impact of the economic crisis, but changes are clearly in the wind,” said Paul Platten, global practice director of Watson Wyatt’s human capital group. “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.”
According to the Watson Wyatt survey, roughly one of four is planning layoffs (26 percent), hiring freezes (25 percent) or raising employee contributions to health care plans (25 percent). While some surveyed also plan other changes, including travel restrictions, restructuring and reductions in training, relatively few in that survey expected to freeze salaries, reduce 401(k) matches, or freeze or close pension plans.
According to the Watson Wyatt survey, almost three out of 10 large employers (28 percent) have reduced their merit pay budgets in the wake of recent financial developments. Of those employers that reduced their budgets, the projected raise is now 2.5 percent for 2009, down from 3.7 percent.
In Southern California, the majority (71 percent) of insurance agents, MGAs and carriers that responded to a cost of living survey conducted by San Diego Insurance Staffing said they were either not increasing or were undecided on whether to increase their employees’ wages in 2009. Respondents to the SDIS survey that are planning salary increases noted the raises would most likely be in the 2.5 percent to 4 percent range for exempt and nonexempt employees. In addition to not increasing employees’ salaries, one respondent to the SDIS survey said his workers have lost their health and dental coverage.
According to the Insurance Journal survey of 125 independent agencies, only 15 percent have instituted a hiring or salary freeze. But 22 percent of agents responding said they have cut unnecessary spending, while the same percentage have taken steps to communicate more with their customers. Only 9 percent of agents said they have taken no steps and will continue with business-as-usual.
But true to their entrepreneurial spirit, independent agents are not just looking to cut, scrimp and save. They are equally focused on new opportunities. Another 22 percent said they are exploring new sources of revenue to help weather the crisis.
If any business owners can find opportunity in the financial mess, independent agents can. It won’t be easy, but they’re not afraid of the challenge.
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