Financial Executives Scrutinize Workforce Expenses as Pandemic Drags On

As the Covid-19 pandemic drags on, U.S. business leaders have become increasingly concerned about costs related to the workforce. And although some plan near-term hiring to bring their workforce up to strength, they say headcount will remain flat over the next 12 months.

According to the Association of International CPAs, financial executives feel a little bit better about the economy than they did three months ago, but their overall outlook remains gloomy.

CFOs & other finance executives show increasing concerns about workforce-related costs as pandemic drags on. @AICPA #HR #HRTech Share on X

Just 24% of CEOs, CFOs, controllers and other CPA executives are optimistic about the American economy, a “nominal” increase from the second quarter’s 20%, reports the AICPA’s third-quarter Economic Outlook Survey. Optimism about the global economic outlook also rose modestly, from 11% to 17%.  

Most executives, 55%, believe their companies have the right number of employees, and fewer  said they have too many—16% in the third quarter compared to 25% in the second. While 27% believe they don’t have enough workers, just 13% plan to hire soon, up from 7% in the previous survey.

The technology, retail trade and manufacturing sectors anticipated the most hiring in the coming 12 months, while transportation, mining and hospitality expected their organizations to shrink.

Covid-19 and Politics

“This has been the worst economic and humanitarian crisis on a global scale in our lives,” commented Ash Noah, the association’s managing director of CGMA learning, education and development. “In the midst of most trends being upended, we’re seeing improvement in a number of categories this quarter, but it’s worth remembering we’re digging out of a very deep hole of pessimism.”

Businesses are also on edge about November’s presidential election, he added. “Our current state of political polarization” is adding to executives’ sense of unease.

Fewer than half of the executives see their companies expanding over the next year, although the number increased more noticeably, from 24% in the second quarter to 43% in the latest survey. And while optimism about their companies’ prospects rose from 30% to 41%, the report points out that 12 months ago, 61% of executives had a positive outlook.

Workforce Costs Become a Concern

Financial executives seem to be casting gray eyes on the workforce. Employee and benefits costs are now their third-ranked concern, up from ninth during the second quarter. Availability of skilled personal is their next-highest worry, up from the eighth spot. They expect salary and benefit costs to increase at a rate of 0.9% going forward, the survey said. During the previous period, those costs were seen decreasing 0.7%.

Following up on the survey, The Wall Street Journal reported companies are girding themselves for those increased labor costs. True, layoffs have skyrocketed since the beginning of 2020, but a number of employers have increased pay to motivate or reward workers for their efforts during the crisis, the Journal said. The newspaper also noted that businesses are expected to increase salaries and bonuses in 2021.

At the same time, however, some companies have stopped providing hazard pay to employees in public-facing positions. Amazon, Kroger and Rite-Aid, for example, have all eliminated the pay increases they offered in the early weeks of the pandemic. Some economists wonder if that’s driven more by the flood of supply on the labor market than any lessening of the dangers front-line workers face, according to CNN.

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