Benefits October 6, 2011

Survey Finds Caution and Seasonality Will Influence Hiring

October 6, 2011 (PLANSPONSOR.com) – Caution and seasonality are influencing hiring expectations for the fourth quarter, according to a recent survey by CareerBuilder. 
 
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Consistent with trends typically seen at the tail end of the calendar, employers anticipate a moderate slowdown in hiring. Twenty-one percent of hiring managers reported they plan to hire full-time, permanent employees in Q4, down from Q3, but on par with 2010.

The tempered plans for Q4 follow a slightly softer recruitment picture in Q3. In terms of actual hiring, 26% of employers reported they added full-time, permanent headcount in Q3. While better than the same period in 2010, this is down three percentage points from Q2 2011—reflecting a more hesitant hiring environment in the face of rising commodity prices, a volatile stock market, concerns over Europe’s sovereign debt crisis and other global issues.

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“While hiring is historically slower in the fourth quarter, recent world events and a structurally impaired U.S. economy are causing employers to be a little more guarded,” said Matt Ferguson, CEO of CareerBuilder. “Job creation levels are not yet high enough to drive down the unemployment rate, but the hiring trends we’ve seen through our surveys and on our job site still indicate an overall positive sentiment among employers. For eight consecutive quarters, 20% or more of employers reported adding new jobs and the same is expected for Q4.”

When looking for talent, companies are still having a difficult time filling certain positions despite the stiff competition for jobs. Two-thirds of employers (67%) expressed concern over the education and skills gap in the U.S. and corresponding deficit in talent for specialized positions. The top areas employers identified as having a significant skills gap include engineering (37%) and information technology (33%).

More than one-in-four hiring managers (26%) reported they hired full-time, permanent staff in the third quarter, up slightly from 25% last year, but down from 29% in Q2. While staff reductions slightly improved year-over-year—11%reporting a decrease in headcount in Q3 2011 compared to 12% in 2010—it was unchanged sequentially. Sixty-two percent of employers reported their staff levels stayed the same in Q3 while 1% were unsure. 

Looking forward, 21% of employers expect to increase their number of full-time, permanent employees in Q4. Ten percent expect to downsize staffs, while 64% anticipate no change and 5% are undecided.

To supplement staffs, 32% of employers turned to temporary help in Q3. Twenty-seven percent plan to hire temporary or contract workers in Q4 with 17% of employers expecting to transition some of these employees into permanent staff.

Regional data presents a mixed picture. While the West leads the U.S. regions in the number of employers expecting to hire full-time, permanent employees in Q4 (23%), it also houses the highest number of companies planning to downsize by year end (12%).

Twenty-one percent of employers in the Midwest and South and 19% in the Northeast plan to add staff in Q4. Ten percent of employers in the Northeast and 9% in the Midwest and South expect to decrease headcount.

Comparing company sizes, small businesses continue to lag larger organizations in hiring activity, but are also less likely to reduce staff levels.

•  Companies with 500 or fewer employees – 17% plan to increase full-time, permanent headcount in Q4; 8% expect to reduce staff levels. Of those with 50 or fewer employees, 12% plan to add new employees while 8% expect to reduce staff levels.

•  Companies with more than 500 employees – 27% plan to hire full-time, permanent staff in Q4; 11% plan to decrease headcount.

Forty-one percent of employers anticipate no change in salary levels in the fourth quarter compared to the same period last year. Thirty-eight percent expect there will be an increase of 3% or less. Twelve percent expect their average changes will be between 4 and 10% and 1% predict an increase of 11% or more. Four percent anticipate a decrease in salaries.

More than 2,600 hiring managers and human resource professionals were interviewed for this survey, which was conducted by Harris Interactive from August 16 to September 8, 2011. The entire report can be downloaded at: http://bit.ly/pvZyd4.

Administration October 6, 2011

Report Finds Private Pension System Stable

October 6, 2011 (PLANSPONSOR.com) – According to a new report by the Society of Actuaries (SOA), as a group, sponsors of private, single-employer defined benefit pension plans will face a rising tide of minimum required contributions over the next five years. 
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“The Rising Tide of Pension Contributions Post-2008: How Much and When?” found the recession and equity market downturn, combined with low interest rates that drive up the cost of providing defined benefit pensions, have put stress on the private pension plan system. In particular, the research shows that aggregate contribution levels are sensitive to the effects of stock market returns due to significant exposure to equity investments in the system.

According to the report, employers contributed an average of $70 billion per year over the five years ending in 2009. Required contributions are expected to average $90 billion per year between 2010 and 2020, reaching a peak level of $140 billion in 2016.

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While challenges remain for many plan sponsors, system-wide these challenges should not be considered insurmountable, according to Joseph Silvestri, FSA, Retirement Research Actuary with the SOA and lead researcher of the report.

“The data shows that employers, on average, have been contributing well in excess of the minimum requirements for the last several years,” Silvestri said. “While the system as a whole is successfully navigating the rising tide of minimum required contributions, there will be individual employers for whom the pension plan funding requirements pose a greater short-term challenge.”

Silvestri says defined benefit sponsors may consider revising funding choices to sustain their pension plans moving forward, if they have not done so already. Potential strategies may include adopting a contribution policy that “smoothes” actual pension contributions regardless of market performance. For those that carry equity risk, strategies may include adjusting asset portfolios to reduce the effects of market volatility and declining interest rates.

“There is an opportunity to realign the pension regulatory structure to reduce sensitivity to economic cycles, and to make private pension plan benefits more secure for employees and retirees,” observed Society of Actuaries President Donald J. Segal, FSA.

Options could include linking minimum required contributions to the sponsor’s equity portfolio risk, credit rating, plan maturity or a contribution thereof, and changing minimum funding requirements to make them less sensitive to interest rates and equity market fluctuations.

“The results of this research pose interesting questions for both sponsors and policymakers with regard to improving risk management and making the pension system stronger,” Segal added. “While more research is needed to understand ways to accomplish counter-cyclical funding, sponsors can take action now by reviewing their funding choices to help mitigate the future volatility of minimum required contributions.”

To read the full report, “The Rising Tide of Pension Contributions Post-2008: How Much and When?” visit http://www.soa.org/files/pdf/research-2011-10-rising-tide-report.pdf.  

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