Recession will hit firms’ workforce planning and benefits, says survey

Multinational companies are trying to be selective in workforce planning, compensation and benefit cuts in 2009 despite expected declines in their businesses, according to new research.

While 81 per cent of respondents to Mercer’s survey say they expect a drop in their own company’s business performance in 2009, most of the 1,028 respondents are likely to curtail overall hiring, reduce salary increases and cut bonuses, but continue to hire talent to fill skills gaps.

Just over a third (35 per cent) of the HR and finance professionals surveyed in firms with operations in more than 100 countries say they are likely to make significant workforce reductions.

“Many multinational companies have been facing rising cost pressure throughout 2008 and in recent months have been managing compensation costs and workforce levels aggressively while working to keep employees engaged and productive,” said Patricia A Milligan, Mercer’s chief markets officer. “But our survey shows that – at least as a group – most of these companies have refrained from taking severe and broad-based steps.”

Milligan added that many fundamental HR-related decisions are likely to be revisited in response to year-end results and updated economic forecasts for 2009. “This is a balancing act. Discussions with our clients indicate that more dramatic actions are being considered by boards and senior management should the downturn become deeper or prolonged,” she added. “It is also likely that companies learnt important lessons in previous economic downturns about the importance of talent in creating competitive advantage, and so are reluctant to take actions that could hamper their recovery once the economy improves.”

Thirty eight per cent of respondents said they planned to maintain the level of HR investments, compared with 21 per cent who said they were “highly likely” to make such cuts. Additionally, 75 per cent of survey respondents said that their company is not likely to invest more to outsource HR functions in 2009.