Companies are striving to protect their human capital in this period of uncertainty
Employers in North America are bracing for the economic impact of the COVID-19 pandemic – by returning to the same cost reduction methods of the last financial crisis, a new report suggests.
These cost-containment measures range from hiring freezes and delayed salary increases, to furloughs and layoffs, according to a recent survey by global advisory firm Willis Towers Watson.
In recent weeks, a total of 1.3 million retrenched workers in Canada and more than 10 million in the US have applied for unemployment benefits after massive job cuts swept across industries.
READ MORE: COVID-19: More people searching for answers on economic relief
For companies fighting to stay ahead – or stay afloat – their top priorities remain the same: to maintain the physical and financial health of their current workforce, notes Adrienne Altman, managing director at Willis Towers Watson.
But despite the focus on employee well-being in a time of crisis, there is still “heightened concern” among employers over how the coronavirus outbreak will impact operations and supply chains.
As a result, Altman says, “companies have started to implement some of the same cost control measures we saw during the last recession.”
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Of the 800 organizations the firm interviewed in March – right as the outbreak began to spread in the US and Canada – 42% had already scaled back on hiring or halted recruitment efforts entirely. More than a quarter plan to follow suit.
Other cost-containment strategies the respondents cited include:
- Reducing or eliminating temporary staff (18%)
- Delaying salary increases (12%)
- Asking employees to go on unpaid leave (9%)
- Freezing salaries (8%)
- Laying off employees (7%)
- Asking employees to cut back on work hours (6%)
While only a minority 7% have so far laid off employees, 37% are considering the option in the months ahead, the report showed.
READ MORE: Fear of recession sparks layoff anxiety
Meanwhile, employers are taking a varied approach in terms of compensation. On one end, those striving to retain essential workers (8%) are paying premiums of about 10%. On the other, those looking to rein in costs are freezing salaries or postponing increases.
“At this point, it appears most companies are attempting to use layoffs and workforce reductions as a means of last resort,” Altman says.
“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.”