Canadian employers bracing for economic slump via layoffs and pay cuts

As the global financial crisis takes a tighter grip on the economy, some Canadian employers are bracing themselves for the looming economic slump. More than four in ten companies either have made or are planning layoffs or reductions (44 per cent) and revising merit payments (42 per cent) over the next year. According to the survey conducted in November 2008 by Watson Wyatt, a leading global consulting firm, employers are also ramping up employee communications and halting new staffing. The survey also indicates that while many companies are considering changes, less than 20 per cent consider such changes to be significant.   

The survey of 138 Canadian-based companies from various industry sectors found that 42 per cent are revisiting merit and other increase budgets for 2009. These organizations anticipate that merit budgets for 2009 will decrease by an average of 39 per cent (from 3.3 per cent to 2 per cent). From an overall perspective, the net effect of these anticipated reductions will result in a revised merit budget of 2.9 per cent which represents a significant decrease from previous projections of 3.5 per cent. The revisions to merit and other salary increases are more prevalent among companies within the financial, professional business services and manufacturing sectors. Additionally, 41 per cent of respondents have already stopped or will freeze new hires while nearly one-third (31 per cent) confirmed they have already made or will be going through organizational restructuring.

“Although there is a high level of uncertainty in the market, employers are cautiously moving forward to deal with the challenges of the economic downturn,” says Liz Wright, compensation practice leader, central Canada at Watson Wyatt Worldwide. “However, while measures such as workforce reduction and cost controls may be necessary in some instances, companies should maintain a balanced approach that includes actions such as enhanced employee communications to retain critical talent and boost employee morale and confidence.”

According to the survey, about half of respondents have already or are planning to increase employee communications in areas such as benefits (54 per cent) and pay (50 per cent).

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