Employers Look to Restore Pay Cuts, 401(k) Matches

Aug. 19, 2009— -- For beleaguered employees who were able to avoid layoffs but had to swallow salary or benefit cuts, relief may be in sight.

In the coming months, more employers are looking to reverse employee concessions and HR program cutbacks, according to the latest bi-monthly report from consulting firm Watson Wyatt.

Its August survey of 175 large employers found that 33 percent who had announced salary freezes planned to rescind them in the next six months, an increase from 17 percent in June. Some 44 percent of employers said they plan to restore salary cuts, up from 30 percent two months ago. And 24 percent plans to restart matching contributions to 401(k) retirement plans, compared with just 5 percent in June.

That's good news for people like Lynn Elliot, 41, who works at Atlanta-based Zep Inc. Her company has cut jobs and costs in the recession, but she managed to stay employed. She did lose 401(k) matching funds of 50 cents of every dollar she contributed to her retirement account.

"With the economy and companies having to cut back on certain things, I understood and I knew that the company was making the right moves," said Elliot, a credit supervisor at Zep.

But after seeing increased profits, Zep, a leading maker of cleaning products, announced last month it would reinstate a portion of its 401(k) matches.

"We started to see some progress and some return to profitability in the business," said John MacDonald, an HR manager at Zep. "We wanted to show that to employees and show them that progress we've made."

Whether more employers follow through on their plans to restore the pay and benefits remains to be seen, but the survey is a positive sign. It all depends on when the economy recovers.