Vault's Careers Blog

Career advice and job search strategies for the modern careerist

U.S. Companies are More Likely to Lay Off Employees

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It wasn’t your imagination: almost every company was laying off over the last couple of years. According to a recent report from HR consultancy Towers Watson, some 74 percent of U.S. companies initiated layoffs, redundancies or RIFs as a means of reducing costs during the recession. That figure also happens to be higher than in any other employment market in the world.

Whether it’s a reflection of cultural differences, evidence that U.S. companies were more bloated and inefficient than their international counterparts, or just a reflection that the recession affected the U.S. economy more deeply than anywhere else, the Towers Watson report contains a couple of startling insights for those interested in the wider employment picture.

First is that U.S. companies were more likely to reduce their headcount than to take any other action to cut costs—while 74 percent of companies shed workers, just 66 percent froze hiring, with 61 percent freezing salaries.* In each of the six other geographic areas in which the survey was conducted (generating responses from 1,176 HR professionals), companies were more likely to freeze hiring, salaries or both than they were to reduce headcount.

Additionally, U.S. companies also took a higher number of cost-cutting actions—a mean of 4.5—than those in any other region

Towers Watson stats on company cost cutting in the recession

Source: Towers Watson 2010 Global Talent Management and Rewards Study

Whether all that leaves U.S. companies in a more competitive position than those overseas remains to be seen. As does evidence on whether U.S. companies cut too deeply and have a scramble for talent ahead of them as the economy recovers. But the report does have one more set of insights as to what the future may hold for companies, job seekers and careerists alike.

When asked what actions they were considering in the event of either having to further cut costs or spend additional funds on labor costs, movement on salary topped both lists. That is, a majority of HR professionals (78 percent) said they’d be most likely to reduce pay increases as a means of cutting costs, while 69 percent said they’d be most likely to increase the salary budget if they had extra cash on hand. **

Unfortunately, the figures on likely layoffs versus hires seem to reflect the current uncertainty in the market: while only 41 percent of respondents said they’d be likely to lay off employees in the event of a downturn, only 54 percent said they were prepared to hire more people if more cash became available.

So there you have it: your future paychecks are definitely dependent on the performance of the economy as a whole. The ability of the economy to create jobs, however, seems to depend on a shift in confidence among the people tasked with making the hiring decisions. And that’s a lot harder to predict.

* There’s no separate stat in the report about companies that reduced salaries: I’m left to assume that this figure encompasses both.
** These figures are global: the report doesn’t break them down by region.

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