Times are tough. Everywhere you look, companies are laying off workers. As businesses face rising interest rates and a slowing economy, employers must make difficult decisions to keep their companies profitable (or just afloat). One way you can cut costs is to eliminate some employee benefits.
Now we know what you’re thinking and, yes, taking away employee benefits may cause a staff mutiny. However, we spoke with industry experts to get advice on how to best go about cutting back on perks while still keeping your employees happy — or at least keep them from staging a revolt.
How to take away employee perks and benefits
If you’ve decided to remove one or more employee benefits to cut down on company expenses, follow these seven steps to do so with the least amount of employee resistance.
1. Determine which benefits have to go.
Eliminating employee benefits is never fun, but it’s sometimes a necessary course of action. Weigh the cost and importance of each benefit to determine which one(s) you can scrap. The decision on what to cut can be made solely by the business owner or you can create a small focus group with the organization’s key players (e.g., the chief financial officer, HR leader, benefits adviser, and so on) to get a well-rounded look at how eliminating certain benefits will impact your company.
It’s essential to consider not only cost savings but also the importance of the benefits you’re contemplating removing to your employees. For example, a staff full of young, childless employees would probably be more concerned about losing a benefit like tuition reimbursement than child care assistance. Some vital benefits, however, like health insurance, should never be on the chopping block.
Just as you would follow a step-by-plan for offering employee benefits, establish procedures for removing benefits and not rush the process. Hasty decisions that blindside employees will only make matters worse.
2. Talk to your managers first.
Getting managers on board with your plans can help ease employee concerns during the transition. Have an open and honest conversation with supervisors and team leaders and answer any questions they may have. Managers are your eyes in the field, so equipping them in advance with knowledge about the benefit reductions will help with the next step — telling employees.
3. Be transparent with employees ASAP.
When it’s time to tell employees the cold, hard truth that a benefit is being taken away, transparency is a must. Being vague or unclear about benefit eliminations will only cause team members to become upset, and delaying the conversation altogether will only compound the problem.
Jared Pope, the founder and CEO of Work Shield, has more than 20 years of experience protecting and cultivating workplace culture. He advises that honest communication is one of the most crucial components for minimal fallout when removing employee benefits.
“Most employees are willing to accept change if the employer is transparent,” Pope told business.com. “Also, if benefits are changing that could impact employee’s budgets, the more advance notice the organization can provide, the better.”
Although the conversations may be uncomfortable, you should hold candid discussions with employees in groups large and small, and in one-on-one meetings if anyone wants to discuss the matter further. Understand that some employees may be upset, but you can make the news easier for staffers to comprehend by being transparent about what’s happening.
4. Lead with empathy.
In addition to transparency, begin the benefit-reduction conversations with empathy. No one likes to hear bad news, but delivering it in a way that makes your employees still feel valued and understood can go a long way in terms of how it’s received. Show compassion for the way removing this benefit will affect them.
“Despite our best efforts, sharing news of cutting back benefits can be difficult, and we cannot control the feelings of those that are impacted,” said Carolyn Clark, VP of employee experience strategy at Simpplr. “However, we can do our best to deliver the message with warmth, transparency and effectiveness.”
5. Explain the “what, why, how.”
Explain exactly what’s being done (e.g., X benefit is being eliminated), why it’s being done (e.g., to reduce overhead costs and avoid layoffs) and how it’s being done (e.g., when it’s going away, if/when it’s coming back, how the benefit’s end will work, and so on). Be thorough with the information you provide during this process to help clear up any uncertainty or confusion. Even as you share as much information as possible upfront, be prepared to answer any questions employees may have.
Clark suggests stating what steps you took to address the organization’s financial issues before making this decision. For example, maybe you reduced your company’s real estate footprint or members of leadership took pay cuts. To further help employees grasp the challenge at hand, it can also be beneficial to share what other difficult cost-cutting measures you would’ve had to take if you kept the benefit.
“Share what the alternative was if the benefit was not cut,” said Clark. “This could be cutting salaries or reducing headcount. This is crucial to bringing understanding to the situation.”
6. Offer alternative benefits, if possible.
OK, so you might be thinking, “If I need to cut some of my team’s current benefits, why on earth would I add more?” That’s a valid question. Here’s a valid answer: Sometimes certain costly benefits aren’t feasible anymore, but there are other less-costly perks that employees would like as a replacement. Consider what options your employees might find beneficial. For example, maybe you can offer more paid leave, team lunches or flexitime, also known as flexible scheduling.
“[Adding less-costly benefits] lessens the fear of scarcity and helps the employee to know that the employer is trying to compensate in other ways,” said Pope. “The goal is to be authentic and open about the decision.”
If you aren’t sure what type of additional employee benefits you should offer, survey your staff to get input from them directly. As you refine your employee benefits package and add or remove perks, consider which benefits are legally required, which are popular and which are fringe.
7. Recognize and support employees.
Your responsibility to your employees in this situation doesn’t end as soon as you have “the talk.” Staffers will likely experience some unease and disappointment during the transition, and that’s OK. But it’s crucial that your leadership team is around to support them, whether that’s through town halls, team meetings or casual coffee chats.
It’s especially important that you remind employees just how important and valuable they are to the organization and that cutting back on benefits is not a reflection of their performance. Whether employees work remotely or in the office, Clark advises creating chances for team members to feel seen and heard whenever possible.
“[Provide employees with] quality time from leaders — whether that’s a short video with updates every week or every other week, hand-written notes or in-person events that provide opportunities for employees to connect,” she said.
A lack of employee recognition is one of the main reasons employees quit. It’s critical to maintain a strong company culture that prioritizes employee support and recognition, regardless of whether you’re eliminating benefits.
How to keep employees happy after cutting back
It’s going to take some work on your part to keep employees happy after cutting back on benefits. Although the extent of the fallout will depend on how valuable the nixed benefits were to your staff, there are strategies you can use to boost morale.
- Strengthen interpersonal relationships. One of the most effective ways for employers to maintain a positive work environment after cutting benefits is to invest in various aspects of the employee experience — ones that don’t involve costly perks. The employee experience largely consists of how employees interact with the people in your organization.
“As humans, we thrive on connection and relationships,” said Clark. “We fall back on the reserve of strength of relationships when times are tough. Look at your organization and see where the opportunities are to build trust, relationships and connections.”
Fostering strong bonds amongst your staff (e.g., by hosting team-building activities or improving employee-manager relations) can help them feel more connected to your company.
- Remind employees of your company culture, mission and vision. Speaking of connection, your employees should feel connected not just to each other, but also to your company’s mission, vision and culture. If you remind everyone what you’re working toward and why, you can intrinsically motivate them to continue to do good work and persevere, even if they’ve just lost a benefit or two.
“If the employees feel like a part of the team and organization in its mission and vision, they will work just as hard with as much passion for the vision and mission [despite losing benefits],” said Pope.
- Increase employee recognition. Making employees feel appreciated and acknowledged is paramount, especially during times of transition. Go the extra mile to make team members feel seen and heard. Stress that this benefit reduction decision wasn’t due to poor performance. You don’t want them to feel like they are being punished.
On the contrary, show that your business can still be a rewarding place to work. There are plenty of low-cost and free ways to celebrate employees and make their commitment to your company feel worthwhile without offering a formal (and expensive) benefit in return.
Overall, honesty, transparency and empathy are key components when communicating to employees that you have to take away an employee benefit or perk. If you’re upfront with your workers and provide the proper context, they will be less likely to hold the decision against you.