However, few firms are preparing for the worst, says research by Willis Towers Watson
September 23, 2016: Companies are hoping for the best, but preparing for the worst in the coming year. Findings from Willis Towers Watson’s Hong Kong and Macau Severance Practices Surveyindicate that the majority of surveyed companies in Hong Kong and Macau remain optimistic towards their performance over the next 12-18 months, while few companies have plans for redundancies or headcount reductions.
The new survey showed that 83% of Hong Kong businesses expect their performance in 2016 and 2017 to be ahead of or in line with their 2015 results, despite the poor global economic outlook and slowdown in mainland China. Only 10% of surveyed companies plan to reduce employee headcount in the next 12-24 months, but over a quarter of Hong Kong companies (26%) have a hiring freeze in place.
“It seems that most existing roles in the job market will be safe in 2017. However, many companies are preparing for tougher times ahead and are reviewing their redundancy and severance plans to be prepared,” said Trey Davis, Director of Talent and Rewards at Willis Towers Watson in Hong Kong.
“The labour market will remain tight in 2017, with the unemployment rate likely to remain low,” remarked Frances Wang, Rewards practice leader at Willis Towers Watson in Hong Kong. “Highly skilled workers are anticipated to continue having multiple job opportunities for the foreseeable future.”
Hong Kong businesses feel pressure from uncertainty
But perhaps given economic uncertainty, close to a quarter of surveyed Hong Kong companies (23%) plan to implement HR-related cost saving measures other than employee redundancies or layoffs. The four most common cost saving alternatives revealed in the study are:
- Hiring freeze for some or all positions
- A reduction or freeze in bonus or incentive funding
- Limits on overtime work and travel expenses
- Encouraging job-sharing and retraining of existing employees
“Although the majority of the Hong Kong business community is not reducing headcount, many are feeling economic pressures, and these are immediately reflected in current employment policies,” added Trey Davis.
Inadequate preparations can lead to high risk
Many employers overlook the importance of a proper and up-to-date severance policy. The survey found that less than half (47%) of surveyed companies have a formal severance or redundancy policy in place. But 21% of companies without such plans are anticipating implementing new policies.
“The way an employer designs and sets up their severance policies reflects the values of that company and their commitment to their employees. This can be taken into consideration by employees when accepting a new job offer, and is one of the elements that attracts and retains talent,” said Trey Davis.
The survey also shows that among those companies that already have a formal severance policy in place, more than 80% of them review these policies only when needed, while more than 90% of companies have not made and do not plan to make severance policy changes in view of the current economic environment.
“Redundancies can happen not only during economic downturns, but also as a result of M&A or company restructuring. Without a proper severance policy in place, the employer is taking the risk that they have to devote significantly more time and money to negotiate individual severance packages and agreements, and make payment calculations for every single leaver.”
“The lack of a clear formal policy could also give rise to inconsistencies in severance packages offered in redundancy, which could result in the perception of mistreatment due to gender, age or ethnicity.”
“These concerns present a strong case for companies to have a proper, formal severance policy in place, in addition to good corporate governance practices.”