A lot of talk has surfaced about the state of employee benefits and workplace perks.
Emily Brandon’s list of 21 Workplace Benefits That Are Rapidly Disappearing for U.S. News & World Report cites a laundry list of disappearing items that were once commonplace. She looks at the decline of everything from health care to legal assistance to, yes, even the company picnic, and her article caught my eye as a great summary of the larger trend at play.
Discourse in the business community is intense around what’s going away, what’s in danger, and what effect it will have on the labor market. But this conversation has been focused around the What rather than the Why – and the Why is the piece that really deserves attention.
Benefits aren’t disappearing out of spite, corporate greed or any other emotion-driven reason. In reality, it’s just like Bill Clinton’s campaign strategist James Carville said back in ’92, “It’s the economy, stupid.”
Perception vs. Reality
I got a call from a reporter last week who was doing a story on this same subject. The reporter seemed convinced that benefits were something offered largely out of a paternalistic duty for employers to take care of their employees. As we talked, she kept coming back to the same question: why do companies feel that they can take benefits away, especially now?
Companies really do want to treat their employees well. Businesses do want their staff to know they care about them after the doors close in the evening. But offering benefits is not solely an act of good will – there are larger forces at work.
Benefits, primarily, are a function of the bottom line.
The economic nuts and bolts
Social reasons aside, companies offer benefits because they are competing for talent. Americans switch jobs about once every four years according to the Bureau of Labor Statistics, and the fight for the best people is fierce. Benefits are an incredible recruiting and retention tool, especially among younger generations. Some data even shows that Millennial workers value health care and retirement plans more than their base salary.
But right now, the labor market is depressed and the pool of talent looking for work is deep. A lot of top-shelf professionals are either out of work or over-qualified for what they’re doing. These individuals are willing to accept less than what they would have even considered in 2007. Benefits can make all the difference if there are choices to be made between prospective employers – but in this market, lots of good workers are happy to take what they can find.
At the same time, corporate profit margins are strained and companies aren’t in a position where they can spend thousands of dollars per employee on an extensive benefits package. The climate simply can’t support it.
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When you consider these ideas together, you see that employers aren’t putting benefits on the back burner because they care any less about their employees. It’s happening because both supply and demand have dropped as the entire demand curve has shifted down.
Right now, companies should be concerned with making sure their core, productive employers are happy, healthy and engaged. A big problem facing many employers is workload management.
Doing more with less is a great idea – to a certain point. Work-life benefits, such as dependent care and personal convenience services, along with programs that boost productivity, are high priorities right now because they are lower cost-higher impact tools that keep employees engaged and satisfied. Plus, these tools send a message of confidence that you, as an employer, are actively interested and investing in your employees’ well-being – regardless of the economic outlook.
As the markets turn, profits will expand and the talent pool will shrink. When this happens we’ll see both demand and the ability to supply the more expensive, big ticket items such as health care coverage and 401(k) matches come back to the levels we saw prior to 2008. It hasn’t happened yet, it probably won’t happen tomorrow, but it will come.
What’s important to remember is that benefit reductions don’t happen out of ill will, and new programs aren’t offered out of kindness. When you strip it down to a very basic level, employers all have to compete for the best people and answer the same core questions:
What do we need to do to keep the best people coming in the door? And once we get them, how do we keep them?