WASHINGTON, Oct. 23 /PRNewswire-FirstCall/ -- As the impact of the global economic crisis takes hold, a quarter of U.S. employers expect to make layoffs in the next 12 months. However, most companies are focusing on increased employee communication and smaller cost-saving measures, according to

"Employers are still sorting out the impact of the economic crisis, but changes are clearly in the wind," said Paul Platten, global practice director of Watson Wyatt's human capital group. "As they respond to the new environment, companies will have to balance how to control costs, maintain employee morale and prepare for future staffing challenges."

According to the survey of 248 companies conducted in mid-October 2008, more than one-third are planning to increase their communication around pay (37 percent) and benefits (35 percent). And roughly one of four is planning layoffs (26 percent), hiring freezes (25 percent) or raising employee contributions to health care plans (25 percent). While some companies also plan other changes, including travel restrictions, restructuring and reductions in training, relatively few expect to freeze salaries, reduce 401(k) matches or freeze or close their pension plan.

Employers are expecting to make staffing, pay and benefit changes in response to the financial crisis

  Actions                        Have already taken    Will take in the next
                                                             12 months
  Increase communication to
   employees about pay                   18%                   37%
  Increase communication to
   employees about benefits              35%                   35%
  Layoffs/reduction in force             19%                   26%
  Hiring freeze                          30%                   25%
  Raise employee contribution to
   health care premiums                  21%                   25%
  Organization-wide restructuring        14%                   23%
  Add/increase restrictions to
   company travel policy                 34%                   21%
  HR function restructuring              15%                   19%
  Eliminate or reduce training           10%                   18%
  Eliminate or reduce the hiring
   of seasonal workers                   17%                   18%
  Downgrade or cancel holiday party      19%                   18%
  Salary freeze                           4%                   12%
  Eliminate or reduce other
   employee programs                      8%                   11%
  Close early retirement window           4%                    5%
  Reduce workweek                         4%                    4%
  Reduce employer 401(k)/403(b) match     2%                    4%
  Salary reductions                       3%                    4%
  Freeze/close pension plans             11%                    4%
  Mandatory holiday shutdown              6%                    2%


  Merit Increases and 401(k) Plans

Additionally, three out of 10 employers (28 percent) have reduced their merit pay budgets in the wake of recent financial developments. Of those employers that reduced their budgets, the projected raise is now 2.5 percent for 2009, down from 3.7 percent.

The survey also found that employees are making moves with their 401(k) plans. More than one-half of employers (53 percent) reported their employees are moving investments in their 401(k) plans out of equities. Also, about two in 10 employers (19 percent) reported more employees taking out plan loans, while slightly fewer (15 percent) reported an increase in hardship withdrawals.

"Employees are obviously concerned about the impact of the financial crisis as well, especially in relation to their 401(k) plans," said Kathryn Yates, global director of communication consulting at Watson Wyatt. "Enhanced communication from employers in areas such as pay and benefits can go a long way toward easing some of that anxiety."

  For more information, visit http://www.watsonwyatt.com/HRprogramsreport.

  About Watson Wyatt Worldwide

Watson Wyatt is the trusted business partner to the world's leading organizations on people and financial issues. The firm's global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,200 associates in 32 countries and is located on the Web at http://www.watsonwyatt.com/.

CONTACT: Steve Arnoff of Watson Wyatt, +1-703-258-7634, steven.arnoff@watsonwyatt.com, or Ed Emerman for Watson Wyatt, +1-609-275-5162, eemerman@eaglepr.com

Web site: http://www.watsonwyatt.com/