Things are looking up as approximately half of the companies that froze salaries and hiring in the past year now plan to defrost in the next six months, reports Watson Wyatt.

According to the latest update of an ongoing series of surveys by the HR consulting firm, more than half (54%) of employers that froze salaries plan to unfreeze them within the next six months, a dramatic increase from 33% in August and 17% in June. Almost half (29%) also plan to reverse hiring freezes at least partially in the next six months, compared with 38% two months ago.

Further, the survey uncovered that an increasing number of employers expect to reverse reductions to 401(k) match contributions in the next six months—this number rose to 35%, from 24% two months ago and only 5% in June. Overall, 56% of companies have instituted a salary freeze and a hiring freeze since the economy began to sag, and 25% have reduced their employer match. Watson Wyatt conducted their latest bimonthly survey in October 2009, including responses from 201 large employers.

“The general economic picture right now is definitely brighter than it was just a few months ago,” says Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. “However, the recovery is uneven and most employers aren't fully convinced that the improvements they've seen are here to stay. While many plan to hire workers over the next few months, they remain concerned about their ability to attract and retain the right people,” she adds.

Almost all employers (96%) have made offers to new hires in the past three months, and the great majority (93%) anticipates making offers in the next three months. However, approximately one-fifth still predict that they will layoff employees in the remainder of 2009 or in 2010. In addition, almost two-thirds (65%) report they are more concerned about the retention of critical-skill and top-performing employees than they were before the economic crisis hit.

Looking to the future, half of employers expect an increase in difficulty in attracting critical-skill employees in the next three to five years, and 55% expect an increase in retaining this type of high demand workers. Due to a negative economic environment, 44% of employers have encouraged managers to make greater use of recognition plans. However, only 8% of these employers have noted managers actually increase their use of these plans to a significant or great extent.

“Despite the slow movement toward recovery, employers are still having to manage a shifting workforce as they balance selective hiring with continuing to make some layoffs,” says Laurie Bienstock, U.S. strategic rewards leader at Watson Wyatt. “In this environment, it is no wonder that employers remain concerned about retaining their top talent. However, recognition programs and other plans that keep these employees engaged and motivated can create a key competitive advantage,” she adds.

Other findings from the survey include:

• Thirty-seven percent of employers think their results have already “bottomed out,” versus 27% in August.
• For companies planning to reinstate their 401(k) or 403(b) match, 70% will change the match back to its original level. Thirteen percent will reinstate the match at a new, lower level, while 17% will vary it by year, based on company profits.
• For companies expecting to make offers to new hires, 83% will do so for professional, non-managerial staff, followed by 71% for director, manager or middle management positions. Only 47% will be hiring for senior management or executive level positions.
• Only 37% of employers plan to organize a holiday party in 2009, compared with 47% that organized one in 2008 and 70% in 2007. Two in five (41%) that are planning a holiday party have decreased their budgets.