Fewer Layoffs, More Pay Cuts, Report Says

By Donald Sears  |  Posted 2009-06-01 Print this article Print

On the day when General Motors files for bankruptcy, a new report from Challenger, Gray & Christmas asserts that, in lieu of layoffs, more companies are either freezing salaries or cutting pay, but not totally ridding themselves of full-time employees.

Some companies sense an economic recovery in the next year to eighteen months, and some are already pared back as far as they can go, so laying off more workers would only make it harder to do business.

"It would be a mistake to assume that companies avoiding layoffs are doing so out of kindness. While forging good will is certainly part of the decision for some companies, many have simply cut to the bone already or never fully ramped up after the last downturn," said John Challenger of C,G&C in a release about the report June 1.

"Other companies may have more workers than they need for current business levels but are reluctant to enact widespread layoffs, knowing that a recovery will mean recruiting and training all new workers. This may be why we have seen an increase in the number of companies cutting salaries and other perks. It is a lot easier to restore compensation and benefits than it is to re-hire and re-train workers when the economy improves," Challenger said.

From the C,G&C report:

More than half (52.4 percent) of human resource executives surveyed in May said their companies had instituted salary cuts or freezes in an effort to cut costs. That was up from 27.2 percent in the same survey last [January] ... The good news is that cuts in salaries and benefits appear to be reducing the need to make permanent job cuts. The percentage of employers making permanent cuts fell from 56 percent in January to 43 percent in the new survey.

With the GM bankruptcy news today also comes news of plant closings and a blow to GM dealerships. The company, now with a 60 percent ownership stake by the U.S. government (and you as a taxpayer) will shed 18,000 to 20,000 workers over the next year, as well as close 2,600 dealerships.

GM will be a leaner company, but unemployment numbers are bound to bounce a little from this unfortunate news. GM, much like many companies right now, will be reducing pay for many full-time employees, keeping in line with this C,G&C report.

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