A national survey of CFOs, conducted by Grant Thornton LLP, finds that optimism is plummeting, as evidence by the increased number of CFOs that report that their companies are scaling back hiring amid worry about the cost of health care and other benefits.
Less than a quarter of CFOs (22%) said that their companies plan on increasing headcount in the next six months – a drop of nearly 50% from six months earlier. And when asked about pricing pressures, CFOs ranked “employee benefits (e.g., health care, pensions)” as their greatest concern. Three-quarters of CFOs also report that they expect to see an increase in the cost of health care benefits – both to their companies as well as to their employees.
“Continuing economic stagnation continues to discourage investment geared to growth and expansion,” said Stephen Chipman, Grant Thornton LLP’s CEO. “Ongoing high levels of uncertainty weigh heavily on business leaders today, stifling growth strategies in this volatile economic environment.”
While 36% of CFOs report that their companies plan on increasing employee salaries in the coming year, more than a quarter say that they plan on reducing bonuses (27%) and stock options (26%). It also does not look as if 401(k) matching will be making a comeback anytime soon.
Inflation appears to be holding steady, with 60% of CFOs reporting that the prices and fees charged by their company will remain the same in the coming months and only a third of CFOs anticipate prices and fess to increase. CFOs were also less concerned with the prices of energy and raw materials (e.g., food, metals), ranking then as second and third behind employee benefits.
Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd, conducted the biannual national survey from Sept. 27 through Oct. 12, 2011, with 254 U.S. CFOs and senior comptrollers participating.
Over the next six months, do you expect the U.S. economy to:
Improve: 3/08- 10%, 9/08- 22%, 10/10- 30%, 4/11- 48%, 10/11- 11%
Remain the same: 3/08- 30%, 9/08- 47%, 10/10- 56%, 4/11- 42%, 10/11- 52%
Get Worse: 3/08- 59%, 9/08- 31%, 10/10- 14%, 4/11- 10%, 10/11- 37%
Over the next six months, do you expect your company’s financial prospects to:
Improve: 10/10- 46%, 4/11- 54%, 10/11- 28%
Remain the same: 10/10- 45%, 4/11- 37%, 10/11- 57%
Get Worse: 10/10- 9%, 4/11- 9%, 10/11- 15%
Over the next six months, do you expect your headcount to:
Increase: 10/10- 28%, 4/11- 39%, 10/11- 22%
Remain the same: 10/10- 51%, 4/11- 42%, 10/11- 55%
Decrease: 10/10- 21%, 4/11- 19%, 10/11- 23%
Over the next six months, do you expect prices or fees charged by your company to:
Increase: 10/10- 31%, 4/11- 50%, 10/11- 32%
Remain the same: 10/10- 62%, 4/11- 44%, 10/11- 61%
Decrease: 10/10- 7%, 4/11- 6%, 10/11- 7%
Which type of pricing pressure are you most concerned about? Please rank the items, with 4 being the greatest concern and 1 being the least concern.
1. Company insurance (not including health care
2. Raw materials (e.g. food, metals)
4. Employee benefits (e.g. health care, pensions)
What changes in the cost of the following compensation and benefits do you anticipate over the next year, on an average per employee basis?
Salaries: Increasing-36%, Same as last year-60%, Reducing- 4%
Bonuses: Increasing- 16%, Same as last year- 56%, reducing- 27%
Stock options and other forms of equity-based compensation: Increasing 3%, Same as last year- 77%, Reducing- 18%
401(k) match: Increasing 5%, Same as last year- 77%, Reducing- 18%
Of the following benefits, what changes in the cost to your company and employees do you anticipate over the next year, on an average per employee basis?
Health care benefits: Increasing – 75%, Same as last year- 18%, Reducing- 7%
Life insurance benefits: Increasing-18%, Same as last year- 71%, Reducing-5%
Disability benefits: Increasing 24%, Same as last year- 71%, Reducing- 5%
Of the following benefits, what changes in the costs to your company do you anticipate over the next year, on an average per employee basis?
Health care benefits: Increasing- 79%, Same as last year- 14%, Reducing- 8%
Life insurance benefits: Increasing 21%, Same as last year- 74%, Reducing – 5%
Disability benefits: Increasing- 26%, Same as last year- 70%, Reducing- 4%
* Percentages may not total 100 due to rounding.
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