7 ways companies are cutting back this year

By glblguy

coffee

My mother in-law received word the other day that more than 10% of the people in her medium sized law firm were being laid off. Fortunately, she wasn’t one of them but it did get me thinking about companies and they types of things I see them doing to cut back.

Here are 7 ways ways companies are cutting back this year:

Layoffs

While we as employees don’t like to admit it, the number one expense most all companies have is employees and thus the most effective way to reduce costs is eliminating jobs. The news is currently full of announcements of companies laying off thousands of employees. Right now, more than 12.5 million American’s are unemployed and the numbers are expected to rise, driving the unemployment to a 25 year high of 8.1%.

Travel

Another large expense for most companies is employee travel. If you work in a company and travel frequently or work with people that do, expect to see travel budgets significantly decrease this year. Companies are encouraging the use of technologies such as video conferencing, Live Meeting, and conference calls in lieu of travel. Additionally, if you are traveling, expect lower caps on hotels, food, rental cars, and flights. The days of flying first class are over.

Training

A recent survey by Wayson Wyatt showed that 35% of employers have reduced or eliminated training all together. If you had planned on company training this year, you might want to go ahead and expect that it may be canceled. Instead, consider self training by reading books and utilizing the internet to keep your skills sharp.

Health care

Over the past few years, I’ve seen my portion of my health care costs go up as my employer pays less and less. I expect this trend to continue especially as health care costs continue to sky rocket. Another way employers are cutting health care costs is by raising deductibles. More than 18% of employees had deductibles of at least $1,000 recently, an increase of 6% since 2007.

Raises and Bonuses

Don’t expect a raise this year and if you do receive one, expect it to be low. More than 65% of employers have reduced their raise or merit increase budgets within the last few months. Average expected employee raise amounts for 2009 is 1.7%, 2.15% less than the current rate of inflation. This is a great reason to look at ways to cut your spending.

Used to get a bonus each year? Might want to set your expectations to not receive one at all this year. Many companies have all but eliminated bonus programs or a the very least have slashed bonus budgets significantly.

Retirement Contributions

A few major companies, including General Motors have stopped contributing to employee 401k programs. While this is currently an extreme measure, I do think you’ll see an increase in companies reducing their 401k contributions.   The good news is that in the past companies that did this only did so during periods of extreme cutbacks and lower profits. They returned to contributing once their bottom lines improved.

Regardless of company contributions, employee 401k programs are still one of the best ways for long term savings.

Employee furloughs

One of the more extreme measures I recently read about is employers forcing employees to take unpaid furloughs in an effort to reduce overall costs. These furloughs require employees to take days off without pay. Furlough programs have been implemented by 11% of surveyed employers, and 6% said they planned to this year.

Furlough programs are hitting employees hard due to already tight economic conditions. Employees impacted by furlough programs are having to find temporary employment at of often significantly reduced salaries in order to try to make ends meet.

Have you been impacted by any of the above cutbacks? What other additional cost cutting measures have you seen or heard of? Add a comment!

Photo by: joelogon


24 Responses (including trackbacks) to “7 ways companies are cutting back this year”

  1. the weakonomist Says:

    The cutting of retirement contributions is the worst thing of all (for people that stay employed at least). With your company no longer investing, you may feel there is no point in investing either. Now you’re one more person not investing. People not investing the money they do have is half the reason stocks have suffered so much.

  2. Wojciech Says:

    I absolutely love the note in the image – I think our office should definitely have one of those.

    I can say that the firms I know around town have implemented almost all of these measures already, and more, to try to reduce their overhead practically to zero (plus rent and power). It’s the only way to meet payroll week after week without cutting more jobs.

    We just have to be patient, and definitely not complain! Negativity at the office as a reaction to such measures only makes it worse.

  3. Christina Says:

    In addition to all of the things you’ve mentioned, some employers in my area are cutting hours in an effort to avoid layoffs.

    My husband’s employer has imposed a wage freeze and a hiring freeze.

  4. Nicki at Domestic Cents Says:

    We’ve found this to be true. My husband works for a local bank. His raise this year was small and he didn’t receive his usual annual bonus. On top of that, they did the first layoff in the history of the bank.

  5. Dan Says:

    My company is in real estate, and we’ve had layoffs, no bonuses, no raises, reduced medical benefits, and forced vacation time, as well as reduced travel and no more cell phone reimbursements for the bosses. Also the little perks are gone, such as the personal trainer in the small workout room. They haven’t yet cut out the 401K match, althgouh I suppose that might be next.

    On the other hand, had they not done these things, we would now have a “for rent” sign on our front doors, so you have to take the good with the bad.

  6. Neal Frankle Says:

    This may seem very “Southern California” but I also many companies cutting back on faith for a brighter future.

    If anything, losing faith is the greatest cut back of all.

  7. Kristen Says:

    My company happens to be one that is actually doing more business because of the economic problems. We are incredibly lucky that we have inexpensive healthcare, the company is contributing to our retirement accounts, and people got raises and small bonuses this year. I’ve heard some people actually have the audacity to complain that their raise wasn’t big enough. What world are they living in? I’m greatful just to have a job. I was thrilled to get a raise and a bit of a bonus.

  8. Greg J. Says:

    I work for a small home builder (we settled on 501 homes in our biggest year ever). We recently had our first ever layoffs – 20% of our work force. We have not received quarterly bonuses since 4th quarter 2007. Wages have been frozen since late 2007. Company trips, vehicles, Friday pizza lunches, and happy hours have been cut. Employees now have to provide their own coffee, creamer, sugar, tea, utensils, napkins, tissues, etc. We’ve sold every single Promo Vehicle (that employees could drive for a week at a time). Office supplies are controlled like the Soup Nazi from Seinfeld. I could on and on, but now I’m depressed! Well, at least I still have a job and we’re doing our best to fight to make it through this tough time.

  9. Christie Says:

    I work in the apartment advertising industry, and my employeer has already done several of these things. The one thing that they have not done yet however is start with layoffs. I am grateful that they are doing everything in their power to cut back, and that the last ditch effort for them is to lay people off. Now don’t get me wrong that may come somewhere down the line, but for now we are all still employeed, which for me and my family is right where I need to be.

    Grateful in Tennessee

  10. Kymm Says:

    We’ve had several layoffs, including an employee who was here for 34 years, and a 10% pay cut across the board but 20% for upper management. We don’t expect to see that money back all year, which definately hurts because I have already gone without a raise for 3 years.

  11. castocreations Says:

    Yup…my company is laying off (at least) 20% in the next couple of weeks. It isn’t something they decided lightly and they’ve been working for several months to make sure they do it correctly and strategically. But it still sucks and is extremely stressful for employees. No one knows who is going. :(

    And if the market keeps going down it will be worse…we’re an investment type company and as our client’s assets decline so do our revenues. It’s really tough.

  12. Twinsmom Says:

    I work in the medical field, and we no longer have paid time off. You can still take holidays and your alloted vacation time, you just don’t get paid for them. I might be able to take some of the holidays off, but I certainly can’t take even 2 unpaid days in a row for a small at-home vacation. We were told it was either lose paid time off or lose health care coverage completely.

  13. Wayward Says:

    My company and my fiance’s company have initiated items 1 through 6 on your list. Thankfully, we’ve both managed to dodge item number 1, though he’s actually been forced to take a 5% pay cut. (after only receiving a 2% raise in 7 years).

    Cutting retirement contributions was the thing that bothered me most. Not only are they messing with my ability to care for my family here and now with wage freezes (or reductions) and health benefit cut backs, they’re also messing with my ability to provide for the future.

    Love the coffee note. It needs a twin for not leaving dirty dishes in the office kitchen sink.

  14. SJ Says:

    On the college front I think less companies are recruiting. It also reminds me of a phd comic with less free food.

    Luckily, I don’t think it’s hit too hard yet… I’m glad recruitment costs are affected less.

  15. KS Says:

    Talk about bad economy. Except for the last item my company did all of the above. Further I haven’t received a raise since 2006, and on top of that pay was reduced by over 20% just some time ago. And this after several brutal rounds of layoffs. I am glad that I still have a job, but it still hurts a lot.
    I pray God has mercy on us all!

  16. Trevor @ Financial Nut Says:

    Las Vegas’s economy is really hurting right now, as people aren’t have nearly as many big work conventions like they had in the past. And if they do, they keep it more local.

  17. Ken Says:

    I have been told no training will happen this next year. I will be taking a 2% pay cut this next budget year. It’s much better than a layoff so I will be glad to continue to have a job.

  18. Funny about Money Says:

    We haven’t had a raise in two years, and probably won’t get one for another two years.

    The furlough day in every pay period amounts to about a $300/month net pay cut for me. If your employer works a deal with the Unemployment Insurance people, it (and you) can participate in the Shared Work plan, whereby you get a day of UI for each furlough day. In Arizona that amounts to a grandiose $48 on a $240 day of gross pay. Hardly worth the headache of applying. But 12 of them amounts to around $575, less taxes, so I guess it can go into the emergency fund.

    Naturally, we’re all thankful not to be laid off. However, the state is now planning another 20% budget cut for the university, which will mean massive layoffs, even of tenured faculty. So those of us who are nontenured or classified don’t count on hanging around forever.

  19. DDFD at DivorcedDadFrugalDad.com Says:

    Things are tough and getting tougher . . . time to prepare.

    Here are my ideas for the new environment we are in:

    Are you prepared for the unexpected? What if you go to work tomorrow and you were laid off?

    Is your resume updated?
    Do you have interview clothes? A suit? Is it pressed? Shined shoes?
    Do you have ideas of where else you might want to work? A competitor? A supplier? A customer?
    Is your emergency fund funded?
    Is your network of family, friends, and business associates in place?
    Do you have a Plan B?
    Can you and your family switch to emergency mode quickly?

  20. threadbndr Says:

    No raise, tiny bonus, hiring freeze and fewer temps, more expensive health care.

    No layoffs in my division yet – keeping fingers crossed. It’s rough everywhere.

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  22. Jonathan@Friends and Money Says:

    In the organisation I work in cuts are continuing to be very severe. I think that it’s gonna take us a decade to emerge from the current worldwide gloom, but you have to focus on the here and now and make the most of it. There’s always a silver lining in the end….

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