Employers look at cost-cutting as COVID-19 impacts economy

As President Donald Trump announced a 30-day extension to social distancing guidelines, employers have begun to eye strategies to reduce costs as the viral pandemic’s total impact still remains unclear.

Due to these concerns, employers have begun considering a series of cost-containment strategies they can do now, which include hiring freezes and, to a lesser extent, wage freezes or delayed raises, according to a recent survey by Willis Towers Watson.

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“Companies’ highest priorities remain the physical and financial wellbeing of their employees,” said Adrienne Altman, managing director, North America head, rewards, at Willis Towers Watson. “However, amid heightened concern over the impact the virus will have on their operations, companies have started to implement some of the same cost-control measures we saw during the last recession.”

Hiring appears to be heavily impacted, with four in 10 companies having frozen or reduced hiring, according to the report. Another 28% will or might do the same and about one in five has eliminated or reduced the hiring of seasonal workers, with more than 35% planning or considering to do so.

Further, one in 10 employers say they have reduced/delayed salary increases (12%) or frozen salaries (8%); however, nearly a quarter (22%) are planning or considering either or both initiatives for the future, the study noted. The good news is relatively few employers have needed to cut salaries to meet budgeting strategies, the study added.

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Also see: 8 benefits employers should zero in on during the COVID-19 pandemic

“We expect companies will continue to evaluate their human capital programs and associated costs for managing people on a regular basis,” Altman added. “At this point, it appears most companies are attempting to use layoffs and workforce reductions as a means of last resort. While layoffs and workforce reductions may become an unavoidable reality, companies are clearly making every effort to protect their human capital during this period of uncertainty.”

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Nick Otto
Nick Otto is HRE’s former senior digital editor. He is a professional communicator with more than a decade of demonstrated accomplishments in newspaper and trade publishing. He has spent the past five years covering the employee benefits space and holds a bachelor’s degree from the University of Florida.