A survey of 130 Asian companies reveals that HR departments remain under increased pressure to cut costs. Despite the need to create cost efficiencies, most Asian HR directors have not benchmarked their department's performance against external measures.

The survey, conducted by Hewitt Associates, showed that Fifty-eight percent of Asian respondents did not benchmark their HR costs against other organisations. Sarah Beech, Hewitt's benefits practice leader commented that, "This [58%] suggests that Asia's HR professionals are feeling tremendous internal pressure to reduce costs without first having the opportunity or time to compare spending against their competitors."

More than 80% of Asian survey respondents have either undertaken or are considering initiatives to contain HRM costs. However, only half of the surveyed companies had audited their HR programme costs in the last year. Moreover, only 15% of these employers had performed a complete audit of their HR programs. Beech added that, "One of the more surprising survey results was that organisations are attempting to control HR spending while continuing to struggle with how best to measure it."

Despite strong pressure to reduce HR costs, Asian efforts to do so focused on only a few initiatives. Chief among them are attempts to control workforce size. The most prevalent practice in this regard is only hiring new employees when absolutely necessary: 72% of respondents indicated they had either adopted this practice or were considering it in 2004, compared to 47% during 2003.

Asian HRD's cost cutting targets staffing levels, comp & ben
Retrenchments are also common cost control measures, with 44% of respondents saying they were either implementing this measure or considering it. This is down from 55% last year but very high by historical standards. In addition, 47% of organisations are either reducing compensation or making selective salary increases to control costs.

Less than one quarter of Asian respondents said they are considering other possible HR cost containment strategies. Most of these are based on the reforming of existing compensation and benefit programs. These include the introduction of flexible benefits programs, reviewing the scope of benefits plan coverage and looking for more cost-effective benefits carriers.

Cost reduction measures being considered by less than a quarter of Asian HR directors include changing group benefits from fully insured plans to refund accounting, putting pension actuarial, group benefits or investment services out for bidding, using technology to increase HR productivity and outsourcing HR transactional activities.

Nevertheless, caution is suggested in the implementation of cost-cutting measures. Beech elaborated that, "In view of predicted skilled labour shortages beginning in the next few years when baby boomers retire, implementing measures that either directly or indirectly cause employees to leave may be shortsighted." She concluded that, "In order to remain competitive, employers must focus on their core competencies and retain key employees who assist in meeting business goals."