The Rewards Profession: One Year After 9/11

A WorldatWork Hot Topic Survey

A Year After 9/11: Pay Freezes and Pay Cuts Less Frequent than Projected

It goes without saying that compensation and rewards professionals have faced a number of challenges between the fall of 2001 and the fall of 2002. An already-slipping economy tumbled downward after 9/11, putting pressure on salary budgets, bonus plans and merit raises.  September 11 was followed just a few months later by huge corporate failures, numerous accounting scandals and highly publicized misdealings by executives.  Of course, Congress and the regulators quickly got interested in many of these issues.  All of these events have changed the face of the profession profoundly over the past year.

In response, WorldatWork surveyed its members in late August 2002 to get a closer view of the changes in the profession since the tragic events and economic disruptions of the past year.  According to the 495 respondents to The Rewards Profession: One Year After 9/11, layoffs and hiring freezes have been heavier than expected in the year since 9/11, compounded by the added pressure of economic and business struggles. Among the survey's respondents, one-third (33%) reported layoffs in their organization during the past 12 months, significantly more than the relatively slight 9 percent who indicated their organization was "considering" layoffs in a similar WorldatWork member study conducted in the shadow of 9/11, in October 2001.

In addition to layoffs, 19 percent of organizations experienced hiring freezes in the nearly 12 months since 9/11, more than the 14 percent who said they were considering hiring freezes in October of last year.

On the positive side, both pay freezes and pay cuts since 9/11 appear to have not been as bad as was initially planned in October 2001. According to the new survey, 10 percent of organizations actually implemented pay freezes since mid-October of last year, compared to 22 percent that predicted they would. And only 3 percent of companies cut pay, compared to 12 percent that predicted they would.

As projected by survey respondents a year ago, business travel did take a hit over the past twelve months, but not quite as much as expected. According to the 2001 survey, 62 percent indicated they believed their organization's business travel would decrease. In this year's survey, only 49 percent indicated an actual decrease in business travel since 9/11 of last year.

Finally, at the one-year anniversary of the terrorist attacks on America, businesses across the nation are preparing to honor those lost and those affected by the tragedies. The vast majority of employers in the survey (66%) indicate they will have a moment of silence during the 9/11 workday, and 30 percent are encouraging employees to wear red, white and blue to work on the anniversary day.  Only 2 percent of respondents will give employees a paid holiday on 9/11/02, and more than a quarter of those surveyed (27%) reported their organization is still deciding how to mark the anniversary.

According to open comments from the survey participants, many companies will also provide patriotic pins or ribbons to employees on 9/11, hold blood drives and fly flags at half-mast.

1. As 9/11/02 approaches, is your organization planning to do any type of organized commemoration for the anniversary of 9/11/01?
54%	Yes or probably yes
26%	No
20%	Don't know

1a. If yes, what are you planning to do? (check all that apply):
30%	Encourage employees to wear red, white and blue to work
4%	Encourage employees to reduce scheduling of meetings on 9/11
66%	Have a moment of silence during the day
17%	Increase EAP availability on and around the day
2%	Paid holiday
4%	Optional unpaid day off
18%	Give time off to attend commemorations
27%	Still deciding what to do
30%	Other

2. How would you characterize your organization's employee productivity in the nearly 12 months since 9/11/01?
72%	No difference; virtually the same as pre-9/11/01
18%	Productivity is up
10%	Productivity is down

3. Which of the following has your organization implemented since 9/11/01? (check all that apply):
19%	Hiring freeze
10%	Pay freeze
33%	Layoffs
14%	Merit freeze
3%	Employee pay cuts
57%	None of the above

4. If your organization has stock options that are currently underwater, which of the following have you implemented during the past 12 months? (check all that apply):
45%	Not applicable, we do not have any stock option programs
17%	We do not have underwater options
Of those who do have stock options underwater:
48%	Cancelling options and reissuing
30%	Performance-contingent options
17%	Repricing options
13%	Lower strike price
4%	Increasing vesting schedule
0%	Phantom options

Security & Work-Related Travel

6. Did 9/11 cause your organization to create new policies during the past 12 months regarding the safety of your U.S. employees who work in the headquarters or main location?
47%	Yes
44%	No
9%	Not applicable

6a. If yes, please indicate the areas of activity/new policy (check all that apply):
69%	Created or updated emergency communications plan
68%	Made efforts to provide new or additional security
65%	Created or updated emergency evacuation plans
29%	Created or updated capabilities to track or locate remote employees
2%	Increased pay because of employment in area of perceived risk
8%	Other

7. Did 9/11 cause your organization to create new policies during the last 12 months regarding the safety of your employees in the U.S. who do not work in the headquarters or main location?
30%	Yes
53%	No
17%	Not applicable (no employees outside of a single main location)

7a. If yes, please indicate the areas of activity/new policy (check all that apply):
72%	Created or updated emergency communications plans
62%	Created or updated emergency evacuation plans
60%	Made efforts to provide new or additional security
35%	Created or updated capabilities to track or locate remote employees
21%	Imposed new travel restrictions
0%	Increased pay because of employment in area of perceived risk
6%	Other

8. Did 9/11 cause your company to create new policies during the last 12 months regarding the safety of your expatriate employees (outside the U.S.)?
11%	Yes
37%	No
52%	Not applicable (no expatriate employees)

8a. If yes, please indicate the areas of activity/new policy (check all that apply):
63%	Created or updated capabilities to track or locate expats
59%	Created or updated emergency communications plans for expats
53%	Created or updated emergency evacuation plans for expats
45%	Imposed new travel restrictions
39%	Made efforts to provide new or additional security
29%	Fewer expatriate assignments
27%	Contacted U.S. embassies in nations where expats are
10%	Recalled some or all expats
2%	Increased pay because of perceived risk (hazard pay)
0%	Recalled expat families only
4%	Other

9. In the 12 months since 9/11/01, has the overall level of your employees' work-related travel:
49%	Decreased
3%	Increased
46%	Stayed the same as pre-9/11
2%	Not applicable (no employees travel)

10. In the 12 months since 9/11/01, has your organization imposed any new restrictions on work-related travel?
66%	No, we've made no changes to restrict work-related travel
22%	We implemented restrictions to work-related travel immediately following 9/11, but they have since been lifted
6%	Yes, we implemented permanent restrictions regarding work-related travel
6%	Not applicable

Benefits

12. In the past 12 months, has your organization either considered or added to your employee life insurance program to cover loss from acts of war or terrorism?
3%	Yes
82%	No
15%	We had it pre-9/11/01

13. In the past 12 months, has your organization either considered or added business-related insurance to cover loss from potential disruptions due to acts of war or terrorism?
6%	Yes
70%	No
24%	We had it pre-9/11/01

Military Leave 

15. What is your current military leave pay practice for active duty status?
10%	Full pay in addition to any military pay the employee may receive
57%	The difference between military and civilian pay
22%	No pay
10%	Not applicable

Respondent Demographics

Number of Employees
8%	Fewer than 100 employees
14%	100 to 499
10%	500 to 999
19%	1,000 to 2,499
12%	2,500 to 4,999
12%	5,000-9,999
6%	10,000 to 19,999
20%	20,000 and over

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