Making some sense of layoffs

Nearly half of companies working to reduce costs attempt to avoid permanent layoffs, according to recent survey results, opting instead to freeze salaries and cut travel expenses.

Global outplacement consulting firm Challenger, Gray & Christmas released results Monday from a survey of 100 human resource executives that showed 92 per cent are initiating some type of cost-cutting actions. Among those, more than 55.6 per cent of <a href=the companies said they were reducing headcount to lower expenses. Yet nearly half (44.4 per cent) are resorting to other measures to decrease costs, and only two per cent of those surveyed said they used permanent layoffs as their sole cost-cutting initiative. According to the findings, 82 per cent of companies employed at least two cost-cutting methods to make their numbers.

“Many companies cannot cut their payrolls as deeply as they have in previous downturns, simply because they did not do as much hiring during the most recent expansion. As a result, they are forced to find alternative ways to keep their costs down,” said John Challenger, CEO at the firm, in a statement.

For instance, more than 66.7 per cent said they cut travel expenses, more than 57.8 per cent plan to freeze hiring and 32% cancelled the employee holiday party. Others froze salaries (27.2 per cent) and reduced year-end bonuses (26.7 per cent) or eliminated them altogether (22.2 per cent), while some cut workers’ hours (24.4 per cent) and conducted temporary layoffs (15.6 per cent).

Fewer companies (10.8 per cent) reported cutting back tuition reimbursement programs, and 11 per cent reduced or eliminated matching contributions to employees’ retirement plans. More than six per cent cut office space expenses through increased telecommuting.

“Companies that have thus far avoided job cuts may not be able to do so for the entire length of this recession, but by reducing costs in all these other areas, they may be able to limit the size of the cuts,” Challenger said.

In the largest monthly layoff toll since January 2002, companies cut 181,671 jobs in November, a 61 per cent increase over October, according to research released Wednesday. Industry watchers expect as the holiday season continues that employers will be looking to further downsize in preparation for a lean new year.

Challenger, Gray & Christmas reported the number of positions cut in November is the highest since January 2002, when companies were struggling to recover in the wake of the terrorist attacks of Sept. 11, 2001. The total number of jobs cut in November not only outpaced previous months this year, but also represents a 148 per cent increase over the same month last year.

“November represents the largest job-cut month since employers announced a record 248,475 planned layoffs in January 2002,” Challenger, Gray & Christmas wrote in a statement.

And don’t expect the holiday season to slow employers’ plans to use layoffs as a cost-cutting measure to prepare for what promises to be more of the same in 2009, warns the global outplacement consultancy.

“Those hoping for a holiday reprieve in downsizing as Christmas approaches could be disappointed,” said John Challenger, CEO at Challenger, Gray & Christmas, in a statement. “The spirit of the holidays will not preclude further job-cutting if economic conditions continue to deteriorate. In fact, December has historically been among the larger job-cut months of the year, with many employers making last-minute staffing adjustments to meet year-end earnings goals.”

Those industries hardest hit in November were financial (91,356) — most notably Citigroup’s plan to reduce payroll by 50,000 employees — retail (11,073), transportation (10,877) and automotive (10,132). Computers and electronics followed with 7,994 and 7,356 lost jobs last month, respectively. Annual totals for the two tech sectors topped out at 59,544 for computers and 30,542 for electronics. Telecommunications companies saw just 170 positions cut, but the year-to-date total reached 34,471.

“With the economy faltering and spending by consumers and businesses slowing to a trickle, other sectors see layoffs mounting. …These areas will continue to have problems as long as spending remains restricted,” Challenger said.

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