Cost-cutting actions that employers have been making to deal with the economic crisis have contributed to a sharp decline in the morale and commitment of their workers, especially top performers, according to an annual survey by Watson Wyatt, a leading global consulting firm, and WorldatWork, an international association of human resource professionals.

The 2009/2010 U.S. Strategic Rewards Survey found that employee engagement levels for all workers at the companies surveyed have dropped 9 percent since last year, and close to 25 percent for top performers.

Additionally, 36 percent of top performers say their employer’s situation has worsened in the past 12 months and the number who would recommend others take jobs at their company has declined by nearly 20 percent.

Compared with last year, top-performing employees are 26 percent less likely to be satisfied with advancement opportunities at their company. They are also 14 percent less likely to want to remain with their company versus take a job elsewhere.

The survey also found that top-performing employees are 29 percent less confident in management’s ability to grow the business. And 41 percent believe that pay and benefit changes made by their employer in the past year have had a negative effect on work quality and customer service.

The survey was conducted in May 2009 and is based on responses from 1,300 full-time workers at large U.S. employers.

“The fallout from the actions employers have taken in response to the recession is now coming to light, and it is significant,” said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. “Having less engaged and committed workers is a major concern for employers. This could have a long-lasting and detrimental impact on productivity, quality and customer service, as well as an increase in the risk of companies losing their best employees.”

The survey also found that most top-performing employees say they aren’t expecting to receive the same bonus or pay increase as they have in the past, even though historically companies have rewarded them with pay commensurate with their performance. More than six in 10 (61 percent) say their companies have reduced or suspended bonuses, while only 35 percent agree their employers reward top employees for performance.

Additionally, 43 percent of top performers said individual performance expectations have increased since last year, while one-third (32 percent) say their company’s financial performance goals have increased.

“One of the many challenges employers will face as the economy recovers is how to re-engage employees, and especially top performers,” said Ryan Johnson, CCP, vice-president of research at WorldatWork. “Taking a total rewards approach and looking at all of the ways companies can motivate and retain — including compensation, benefits, work-life initiatives, and career development — is going to be essential.”

Other findings from the survey include:

  • Regardless of whether companies downsized, 89 percent of employers report taking at least one or two actions to minimize the extent of workforce downsizing. On average, survey participants report taking 3.5 different actions.

  • Nearly three out of four (72 percent) employers have gone through a restructuring or made layoffs since the economic downturn began last year.