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Targeted workforce reductions planned by over a third of Canadian employers

By Workplace Staff
| www.cos-mag.com

The Canadian employment picture looks mixed at best in 2010, with hiring up at a majority of Canadian organizations even as some plan to continue making targeted workforce reductions, according to a new survey by Towers Watson, a leading global professional services company.

The survey of 459 employers globally, including 73 in Canada, conducted in early January, also found that while Canadian organizations are reporting lower productivity than those in other parts of the world including the U.S., employers are optimistic about employee engagement levels which are expected to remain largely the same or increase.

The Towers Watson survey found that 87 per cent of Canadian employers plan to hire for new positions in 2010. However, 39 per cent are also planning targeted workforce reductions, down slightly from the 44 per cent that have done so since the financial crisis began. Canadian organizations are acting slightly more conservatively than their U.S. counterparts, where 92 per cent of employers are planning to hire and only 36 per cent are planning targeted workforce reductions.

Fifteen per cent of Canadian respondents reported lower productivity compared to pre-financial crisis levels. This is a higher percentage than reported in any other region globally. In fact, over half of respondents in the U.S., Europe and the Asia-Pacific reported higher productivity compared to pre-financial crisis levels, while only 38 per cent of Canadian organizations have reported productivity increases. Interestingly, the recession's impact on employee engagement has also been mixed – while 27 per cent believe that employee engagement has risen since before the financial crisis, 23 per cent report lower engagement today. For 2010, far more companies expect engagement to rise (36 per cent) than decline (8 per cent).

Not surprisingly, given employment patterns both pre- and post-crisis, 27 per cent of the Canadian respondents agree that it's easier to retain talent now than it was before the financial crisis. However, many employers (41 per cent) think retention will be more difficult a year from now.

"Without question, the last 18 months have been challenging for employers and employees, and while there are signs of improvement, it's clear we're not going back to 'business-as-usual' anytime soon," says Kevin Aselstine, managing director for Towers Watson in Canada. "As always, the question is how lean can companies run – especially as demand for products and services rises? Those slower to reinvest in their workforce could find themselves at a competitive disadvantage.

"Also, while many organizations have clearly sustained and even improved employee engagement in very difficult times, that could change if employees begin to burn out under the weight of increased market pressure and heightened workloads. That's when retention risk becomes very real – and a potential threat to growth," Aselstine notes.

While some Canadian respondents said that the percentage of their employees working past their desired retirement age is higher than it was pre-financial crisis (33 per cent), most employers have indicated it has stayed the same (64 per cent).

Despite recent cutbacks due to the economic environment, about one quarter of respondents in Canada reported higher total labour costs now, compared to pre-financial crisis – and 40 per cent expect higher, not lower labour costs a year from now. Other findings from the survey:

  • Pay: Canadian employers expect the median salary increase in 2010 to be 2.5 per cent, compared to 3 per cent in the U.S. and 2 per cent in Europe. Employers expect to fund their bonus plans at 100 per cent this year, compared with 94 per cent in 2008 and 90 per cent in last year.

  • Pensions and Benefits: Twenty per cent of Canadian employers said that their employees' share of the cost of health care coverage is higher now than it was pre-financial crisis, and no significant changes are expected going into 2010. Only five per cent of Canadian respondents reduced company contributions to retirement savings plans, but 10 per cent reported that employees have decreased their contributions. Almost a quarter (23 per cent) of Canadian respondents said employees had shifted retirement savings plan allocations out of equities; however, 12 per cent expect employees to shift back towards equities a year from now.

Employers are not turning a blind eye to their employees' struggles – In a year from now, 30 per cent expect that they will put more emphasis on ensuring benefits provide a desired level of security for employees. However, a larger number expect to increase their focus on controlling and reducing benefit costs (38 per cent) and managing the risk and volatility of benefit costs (44 per cent).

"While Canadian employers are clearly hopeful that 2010 will bring healthier balance sheets and bottom lines for their businesses, they also seem mindful their employees might not share that optimism," says Aselstine. "With unemployment numbers still high, many employees will not be able to shake off their concern for the future. How a strengthening global economy will affect these trends remains to be seen. The good news, based on our client experience, is that many companies already recognize the need to make thoughtful investments to retain and engage their existing talent despite the continuing uncertainty about the business climate and the resulting caution about taking on added workforce costs."

The Towers Watson analysis can be found at www.towerswatson.com

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