Some Employee Costs Set to Rise, Say Finance Chiefs

Benefits expenses may not move much in the next 12 months, but U.S. CFOs project an increase in employer costs for workers' salaries.
Iris DorbianJuly 10, 2014
Some Employee Costs Set to Rise, Say Finance Chiefs

This past winter might have been brutal and unrelenting, but apparently it hasn’t dampened CFO optimism.

A new report by Grant Thornton indicates that 51 percent of CFOs feel the economy will improve in the next six months. That same number is similarly hopeful about their sector’s financial prospects.

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But when the unemployment rate is dropping and more companies are hiring, employer-funded costs for compensation and benefits tend to rise. CFOs are expecting some of that, but they aren’t forecasting across-the-board increases.

More than half (54%) of the 1,000 executives Grant Thornton polled said the costs of employees bonuses would remain the same for the next 12 months, and 70% said equity-based compensation would trend similarly. The costs of 401(k) matches and employee retirement contributions other than 401(k) matches would also remain steady, more than 80% said.

But companies aren’t going to totally escape higher overhead. Almost 70% of the CFOs said employee salaries will bump up considerably during the next year (see chart at bottom of story). In addition, 55% of CFOs believed the costs of employee health benefits would increase, with 11% indicating they would rise considerably.

Besides some increases in the costs to employ workers, CFOs said that they also expect higher energy and raw materials costs. Fifty-four percent of the CFOs predicted an increase in energy expenses. “Many executives have made this issue a priority and designed strategies to improve their company’s use of energy,” according to Grant Thornton. “These strategies include increasing the use of company-generated energy, installing or replacing systems with energy-efficient products and taking advantage of energy-efficiency programs and incentives provided by many utility companies.”

Also on the rise will be raw materials prices, indicated 59% of CFOs. “Continual, sustained growth in countries such as China and India has made the raw materials market much more competitive,” according to Grant Thornton.

Of the survey’s participants, the majority (76 percent) were from private companies while the remaining 24 percent were with public firms.

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