Conventional Wisdom

The long-held conventional wisdom that people won't leave over benefits but they will over compensation appears to be playing itself out in organizational responses in these later stages of the current recession. As the economy turned south the majority of organizations took compensation cash saving actions in the form of layoffs, furloughs and pay decreases along with benefit cash saving actions in the form of higher deductibles, co-pays or out-of-pocket maximums and increased premiums.

As the economy appears to have bottomed out and employer concern shifts to retention of top performing employees the trend is also shifting to returning salaries to levels approximating pre-downturn. In addition the reduced headcount has provided opportunities for expanded roles and responsibilities for high performers as a means of engaging and retaining their services.

Despite these improving trends on the compensation side their appears to be little to no improvement in trend on the benefits side. Many of the cost shifts that occurred recently are likely to be retained. Going forward the employment deal has employees owning a greater proportion of their health care and retirement costs. In order to manage expectations and keep people engaged, a large majority of the participants in a recent Watson Wyatt study inidcated they have significantly increased their communication with associates.

Watson Wyatt bimonthly report on HR trends digs into this reality and tracks the trend over the last 10 months. http://www.watsonwyatt.com/news/pdfs/WT-2009-13301.pdf