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Personnel Today

Staff bear the brunt of corporate cost cutting

by Personnel Today 11 Jun 2002
by Personnel Today 11 Jun 2002

The economic downturn has forced most companies to slash staffing costs by
initiating measures including pay cuts, recruitment freezes and redundancies,
according to a new survey.

Research from Mercer shows that employers are feeling the bite of the
economic slowdown, with 50 per cent losing revenue and 42 per cent reporting
lower profits.

The survey of more than 1,000 firms found that cutting labour costs was the
main way of dealing with these losses. All recruitment activity was stopped by
42 per cent and 31 per cent have made redundancies.

According to the survey, 30 per cent of companies reduced the annual salary
increase, 21 per cent introduced a wage freeze, and 8 per cent even imposed
wage reductions on staff.

Safarina Kardany, a senior researcher at Mercer, said the findings showed
events in the US had led to major cost cutting at companies across the world:
"We were surprised that many of the cost-containment measures around the
globe have been just as stringent as in the US. This illustrates the
far-reaching impact of the US slowdown on the world economy," she said.

Companies have responded to the downturn by implementing a range of
cost-cutting initiatives, with 71 per cent introducing some sort of reduction
scheme.

Just over half have undertaken organisational restructuring while a third
scaled down by either closing, shrinking or divesting their under-performing
businesses.

However, marketing initiatives seemed to be less affected by the slowdown,
with only 9 per cent delaying new product launches or new market entries.
However, the downturn did affect decisions to introduce new distribution and
pricing schemes in 23 per cent of responses.

By Ross Wigham

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