Pity anyone who thinks that consumer spending is going to rev up the economy anytime soon. Americans will feel the impact of pink slips far more than stimulus checks in the coming year, according to finance executives. Even employees who are left standing will have less to lean on as compensation and benefit packages shrink. The pain is certain to spread, because finance executives plan to cut payroll costs just about every way they can, according to a new survey by CFO Research Services, a division of CFO Publishing.
In a sign that the economy will likely worsen before it improves, 46 percent of CFOs plan layoffs in the next year. Nearly 60 percent will not hire any new employees. Almost 40 percent will eliminate overtime, while another 18 percent plan to reduce workers' hours. The vast majority will renegotiate the terms of their health-care plans, a process that has become an annual rite as companies continue to struggle with the rising cost of health coverage. (According to The Segal Co., medical coverage costs rose between 10 and 13 percent in 2007.) Surprisingly, however, most CFOs say that despite the cutbacks they still anticipate growth in payroll costs, indicating perhaps that they expect to continue feeling the effect of rising benefits costs.
Along with the large-scale changes they plan to make, finance executives are also considering a wide variety of tactical moves. One finance chief says his company will drop health-care coverage for spouses who are employed and eligible to receive benefits through their own workplaces. Another says his firm will adopt performance-based pay, which will reduce some salaries but raise the pay of the most productive workers. And many will likely agree with one CFO who says, "We are questioning all overtime, and when we have attrition we are questioning whether to fill the vacant positions."
Is there any bright spot to be found amid all this gloom? Yes, and it appears to be shining directly on CFOs: most respondents said they expect executive management to feel little or no impact from the coming cuts.