Companies More Likely to Cut Bonuses, Benefits Than Jobs

A recent Towers Perrin study, which polled more than 450 companies nationwide, found 66 percent of those firms did not think they would make significant job cuts, while 46 percent planned to make smaller, more targeted cuts. 49 percent of those polled said they would reduce raises and merit pay hikes, and 40 percent said they would cut existing levels for bonuses and incentive pay.

The study revealed that managers are concerned with the long-term negative effects of across the board salary cuts, more than half of the respondents were 'somewhat to very concerned' about losing top talent as cuts are made to adapt to the recession. According to Ravin Jesuthasan, managing principal in Towers Perrin's Chicago office and leader of the recent study, "To address this issue, many organizations are taking a proactive approach: 30% are considering cash-retention awards and 41% are considering targeted-salary increases to help retain and motivate top performers." Companies have learned from previous times of economic hardship the importance of encouraging retention of their top-performers.  

Industries hit especially hard by the economic downturn, particularly the financial sector, have opted for dramatic job cuts as a way of reducing costs. Last week, Bank of America Corp. announced it would cut up to 35,000 jobs as it completes its acquisition by Merrill Lynch & Co. The layoffs at Bank of America come on the heels of Citigroup Inc. announcing last month it would reduce its staff by about 50,000. Those massive cuts represent just part of the grim Nov. figures for the financial sector, which had its second-worst month for layoffs since Sept. 2001, according to layoff-tracker Challenger, Gray, & Christmas.