Right-size workforce and cost control measures are key for companies in the down

ewitt Releases New HR Monthly Watch Report That Assesses China's Current Economic Pulse

      ChinaHRP.com SHANGHAI, Feb. 26 -- Hewitt's January 2009 HR Monthly Watch report reveals that companies are under greater pressure to evaluate the size and composition of their existing workforce, and are seeking to find the best way to do so without jeopardizing their talent pipeline. The report also indicated that organizations are under significant pressure to control costs and scale back wherever possible, particularly in certain hard-hit industries such as: auto, semi-conductor and electronics sectors.

    Despite the global economic crisis, Hewitt's January HR Monthly Watch study of 167 organizations shows companies still expect to grow sales revenue in 2009 (11 percent) albeit at a slower pace than in 2008 (21 percent). The slowdown is being felt most severely in areas with a heavy concentration of export-oriented manufacturing companies such as the Pearl River Delta where study participants were forecasting to expand sales revenue by four percent.  In contrast, Chengdu and Chongqing-based participants were projecting a 17 percent increase in sales revenue.

    The January 2009 HR Monthly Watch also revealed that, of the 167 companies participating in the study, 80 percent have not downsized their workforce nor plan to downsize in the near future. Industries hardest hit by the economic crisis, such as the automotive, semi-conductor and electronics sectors, reported workforce reductions of 14 percent, 12 percent and 11 percent, respectively.

    Companies are also seeking to control costs and have readjusted salary increase rates accordingly.  In early 2008, employers were expecting to increase salaries around 10.6 percent in 2009.  However January's study figures indicate employers are now forecasting salary increases of only 6.4 percent in 2009. 

    The semi-conductor industry has adjusted forecasts most aggressively, expecting a 3.6 percent salary increase rate, with the auto, chemical, and electronics sectors expecting increases of around five percent.  Even businesses in industries enjoying continued growth and expansion in China, such as the medical device and pharmaceutical industries, have trimmed expectations and now forecast increases of around nine percent.

    Jenny Li, general manager of Hewitt China, commented:  "After 10 years of salary increase rates that averaged eight percent per year, this forced compensation decrease may pave the way for a return of more reasonable rewards packages.  Where before we saw a growing misalignment between employee pay expectations and real capability, employee attitudes are becoming more realistic which is much healthier for China in the long run."

    Hewitt's HR Monthly Watch report also revealed that companies are taking additional measures to promote greater people, increase workforce efficiencies, and curtail costs:

    -- Controlling working hours via short-term close downs or mandatory leave
    On average, 17 percent of companies have implemented short-term  close downs, 23 percent have implemented mandatory annual leave, and four percent of companies indicated they have implemented short-term  mandatory leave without pay.

    -- Controlling and optimizing workforce structure
    The study indicated that companies generally have hiring restrictions in place for supporting functions but plan to continue to hire judiciously for specific strategic positions.  The consumer goods, medical device, and pharmaceuticals industries are more bullish about hiring in 2009, especially for business functions.

    -- Controlling compensation costs through targeted adjustments
    Controlling overtime costs, cutting year-end bonuses, lengthening the salary review cycle, and, in some cases, freezing salaries are some of the key ways organizations have indicated they are saving costs.

    -- Training
    Most industries indicated training budgets had been cut by close to 10 percent.  However, the high tech, consumer goods, and pharmaceutical industries bucked the trend, planning to increase training budgets by around 20 percent.

    -- Travel
    Most companies indicated they had made economy class travel mandatory, had restricted travel allowances, and put in place guidelines for employees to use more economic hotel accommodation when on business travel.

    Audrey Widjaja, Talent Consulting Director for Hewitt, commented:  "Every company must develop its own unique approach in managing its human resource strategy on the basis of its business strategy in the current economic environment.  While some companies might see the tough economic environment as life-threatening, others could very well view the circumstance as an opportunity of surviving and becoming the strongest in the aftermath.  For the latter companies, their actions would be more deliberate, holistic, longer-term, and strategic, instead of purely reactive and short-term."

    About HR Monthly Watch
    To track the impact of the economic crisis on businesses in China, Hewitt has launched HR Monthly Watch, a comprehensive study of how companies are, from an HR perspective, managing their business in the downturn. The study captures data points and insight around sales growth, working hours, compensation, benefits, training, performance, and a host of other factors.  HR Monthly Watch provides up-to-date insights on dynamic market trends, and serves as a timely reference to guide decision-making.

    The information in this report represents the views and opinions of 167 companies collected between January 1 and January 23, 2009.  Of these companies, 39 percent were engaged in manufacturing, 35 percent were service businesses, and 26 percent managed diversified operations.

    About Hewitt Associates
    Hewitt Associates (NYSE: HEW) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt consults with companies to design and implement a wide range of human resources, retirement, investment management, health management, compensation, and talent management strategies. As a leading outsourcing provider, Hewitt administers health care, retirement, payroll, and other HR programs to millions of employees, their families, and retirees. With a history of exceptional client service since 1940, Hewitt has offices in 33 countries and employs approximately 23,000 associates who are helping make the world a better place to work.

    For more information, please visit http://www.hewitt.com