A Guarded Employment Diagnosis in a Slow Recovery

The latest Duke/CFO Business Outlook Survey shows U.S. finance chiefs remain optimistic, but are wary of hiring.

The smaller companies in the survey — those with less than $100 million in revenue — appeared to be more vulnerable to the fallout. Half of the respondents from these small companies said that, as a result of the ACA, they would consider either switching some employees to fewer than 30 hours per week or hiring new employees that work fewer than 30 hours. Only a third of those from companies larger than $100 million expressed the same sentiment.

A more common effect at companies of all sizes is likely to be the acceleration of recent trends in benefits management in response to healthcare costs that have been skyrocketing for years. In the Business Outlook Survey, 44 percent of respondents said that they would consider reducing health benefits to current employees as a result of ACA, and 38 percent would consider increasing employees’ or retirees’ contributions toward health benefits.

Mark Verbeck, CFO at Coupa Software, a provider of cloud-based spend-management software based in San Mateo, Calif., thinks that, in the high-tech sector, at least, companies mostly wouldn’t expect to see any direct impact from the ACA right away. “For most high-growth tech companies, it’s very competitive for employees,” he says. “The need to continue attracting employees in a competitive environment would make the company unlikely to increase the employees’ burden.”

What worries Verbeck more, he goes on to say, is the excise tax that takes effect in a few years. That’s the so-called “Cadillac Tax” that will be imposed on high-cost health care plans, the ones with the most generous benefits. “Depending on how that Cadillac Tax shakes out,” notes Verbeck, “it might impact how we have to design our plan. I think we probably will want to strive to avoid the tax, so we’ll have to see what we could do to structure the plan so that we are right at the limit.”

The Round-up from Around the Globe
Survey results from other regions of the world were mixed, but primarily positive. Respondents from Asia showed a decided rebound in their outlooks. Rather gloomily last quarter, finance executives from the region expected earnings to take a dip into the negative; now, however, they see decidedly brighter prospects and are targeting growth of 7 percent or more in both earnings and revenue over the next 12 months.

Not surprisingly, European respondents once again were found taking up the rear, expecting earnings to grow by only 2.3 percent (for public companies) and revenues by 2.8 percent (for all companies, including private). However, given that economic recovery in Europe has been lagging that in the U.S. and other regions by six months or more, this sluggish pace could be expected.

Potentially more troubling in Europe is the fact that expectations for capital spending, product pricing, and full-time employment all fell into the negative this quarter. The fall-offs may be reflecting European finance executives’ recognition that belt-tightening will still be needed in the face of painfully slow economic recovery. But despite all this, European finance executives appear to see at least a dim light at the end of the tunnel, with 45 percent reporting that they are more optimistic about their individual economies than they were last quarter, and only 18 percent saying they are less optimistic.


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