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Let's Get Rid of Employee Benefits 3/3/2011

By: Dr. Nick Dayan

Let’s get rid of employee benefits! In other words, let’s treat our employees badly. Why do we have employee benefits? Have they lost their usefulness and purpose in corporate America? Just look at any reputable news station today and it is easy to see that much of the unrest and outrage towards many state governments has to do with that dirty eight letter word, “benefits”. Many of our astute lawmakers are beginning to meet in small dark corners of Capitol buildings around the country and talk about cutting benefits. Our political leaders see this as a way of cutting substantial costs in a hard economic time.

For just a brief moment, let’s take the emotional aspect out of this decision and make it purely a numbers decision. We will revisit the emotional aspect shortly.

As for the cost cutting decision maker, here is their simple solution (I’m sure that many insurance companies who sell an “Individual” product would happily agree). The “solution” is to increase every employee’s wage in an organization by an amount that would allow them to go out and purchase their own insurance. Make the employee take more responsibility on how their benefit dollars are spent and make them plan and work harder to cover their own retirement plans. At which point, the burden of major benefit administration and the cost associated with it would no longer fall on the employer and effectively rid management responsibility of benefits. This would create an instant cost savings directly affecting the bottom line.

Again I pose the question: Should we get rid of employee benefits and cut costs and balance budgets? Let’s stop and think about what the ramifications of such actions would be to any organization.

If you give an employee a perk, and then take it away, it could prove to be detrimental to the core corporate culture that an organization has worked hard to develop. Nothing could be stronger for a group of employees to bind together and decide that they would need third party intervention against the management decisions in which they don’t agree with. In other words this would be a huge rallying cry for union organizers to put their “big brother arm” around YOUR employees and utter those magic words…”We will save the working man.” Sound familiar? Corporate America, you had better listen now! Because if you are concerned about cost savings in your organization, just let “Big Brother” get to your employees and see what those benefits really meant to them. I am certain that running your business or municipality in an atmosphere where a “collective voice” dictating to you how you are going to run your company and how you are going to start spending your Human Capital dollars is not what you want. It can and it will happen.

History shows us that offering a perk or a benefit can be traced back many years. However it became more prevalent to the workforce in the late 1950’s and early 1960’s. Primarily because of the post war baby boom and the need for complete health care coverage (Notice I did not directly blame the baby boom generation for the rise in the cost of doing business in this country). Thus, due to the increase of usage, the cost of medical care began to rise, and organizations began to offer additional compensation in the form of coverage in order to help create and maintain competitive advantages to attract and retain employees. Additionally, it was used to influence high value candidates on which company they would want to work for. An employer would provide benefits to workers for being part of the organization. This basically means that a benefit is viewed as a reward given to an employee for organizational membership.

As stated previously, benefits can influence an employee’s decision about which particular employer to work for, whether to stay with or leave an employer, and when to retire. What benefits are offered, the competitive level of benefits, and how those benefits are viewed by individuals all affect employee attraction and retention efforts of employers. These benefits encompass:

  • Security benefits
  • Retirement benefits
  • Healthcare benefits
  • Financial benefits
  • Family benefits
  • Time-off benefits

All of these, by business analyst’s standards, can be tied to a metric and sliced and diced to fit projected revenue and costs. In other words measured and adjusted to meet budgetary needs. All of them are measured and monitored but there is one more class of benefits that can’t truly be measured; miscellaneous benefits.

Miscellaneous benefits are those simple little things that are not, in many cases, directly monitored and identified daily as a number that can fit easily into the bottom line. Let me give you an example.

We worked with a company who had a group of employees that sought out the services of a labor union and were trying to organize their employees. Along with the “normal” complaints about their dissatisfaction with management and how they felt they were unappreciated, they made mention of some other factors that were emotional in nature. Although management felt these were very small complaints, they were very big in the minds of the employees.

The employees told us that when their new CEO started, he would bring donuts every morning. In addition the company provided free coffee for the employees. As the months passed, the morning donut routine became less frequent to the point that it finally stopped. When having a donut in the morning, the employees saw this as a perk (a benefit if you will). They would go to the break room and have a donut and some coffee and have a little face time with the CEO.

When this stopped, the employees felt that not only was a benefit taken away from them, but their face time (also a benefit) with the CEO ended as well. Their conclusion was that the management ceased to care about what they had to say. To make matters worse the company also discontinued the free coffee. At this point it became a hot bed of emotions as the employees began to look around and notice other similar perks taken away. Management tried to explain that they were cutting costs, but it fell on deaf ears. Management told us that they “communicated” the cost savings efforts and that they “did their best”.

A few of the changes noticed by the employees included

  • Lotion bottles and soap dispensers in the restrooms were no longer being replaced
  • Cheaper toilet paper was being used and was described as being “a grade above recycled newspaper”
  • Janitorial services had been cut back due to cost cutting measures.

The place was not getting cleaned as frequently and a feeling of discomfort grew between the employees. Again it was felt that management did not care about the employees.

Not to be flippant with these examples but this was very important to the employees. What had happened to all their perks? The looming question in their mind was: What was the next perk to be cut? These were benefits that the employees counted on and it made them feel valued.

The final straw that sent the employees looking for third party representation was when the CEO announced the reduction in healthcare benefits being offered and an increase in the employee premium. Management tried to show some facts and figures stating that this was a “trend” in their business line and in America as a whole but employees felt it was just another benefit being taken away from them. Remember, I stated earlier, if you give an employee a perk, and then take it away; it could be detrimental to the core corporate culture that an organization has worked hard to develop. Unfortunately, this is not an isolated case. I am sure many of you reading this have been a part of or have indirectly been a part of cultures like this that have fallen apart (or at the very least know someone who has been in this scenario).

So let’s get rid of benefits? In all reality, it’s not a good idea! Yes, there are times where you have to cut costs. This is an unfortunate part of today’s economic crisis. If there are no alternatives, then OVER COMMUNICATION may be the only answer. In other words, tell the employees exactly why this must happen. Don’t keep them in the dark or guessing or they will go look for the answers. Take the time to ensure that they feel like they are part of the solution and that by taking the hit they are working towards building a better tomorrow where they will all share in their successes.

Although companies must make coordinated and concerted efforts to cut back in other areas in order to maintain budgets and cost control, they must do everything to not take it away from the employees. For if you do, be ready to lose the talented employees you worked so hard to attract and develop. Or even worse, their Big Brother (the Union) may very well be invited by the “working men and women” you took benefits away from, to come in and legally compete for your employees’ loyalty. When they do get that loyalty, be equally prepared for the unions to also tell you how your organization must maintain benefits. Keeping an eye on your miscellaneous benefits, over communication and weighing your options when trying to determine what perks you can deliver while balancing budgets far outweighs your employee’s alternative solutions!

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