While economists are happy to report that the economy is looking up, your balance sheets tell you differently. Your business is in a slump and has been for several quarters now. You know that you need to make cuts somewhere, but where?
While employee benefits and incentives are crucial to a productive, happy workforce, sometimes they need to be trimmed to balance the budget. When you have to make the hard decision to cut incentives during a tough economic time, follow the tips in this guide to minimize impact on employees and recover as quickly as possible when the economy rebounds.
- Don’t fool yourself. Take a hard look at your finances and make a realistic decision about what you need to cut. Many companies start out by cutting out too little, ensuring a slow, painful death for the company.
- Be transparent. By showing your employees your financial situation and inviting feedback, you can help people understand why some of their benefits need to be cut.
- Make cuts from the least necessary benefits to the most necessary. While health and retirement benefits may make up most of your compensation package, your employees would probably agree that these are the most important benefits they see. Before you go after incentives that people depend on, try to cut out things that aren’t absolutely necessary like company parties, vehicle usage and education reimbursement.
- Start cuts at the top. Your management team probably enjoys the most benefits anyways, and when your employees see that their management has already made real sacrifices, they’ll be less likely to complain when they are asked to do the same.
- Reinstate benefits when the economy rebounds. Many times, when a company cuts matching 401(k) contributions or raises health insurance premiums, those benefits never come back. If you reinstate benefits as soon as your company gets healthy again, you’ll be able to show your employees just how valuable they are to you.
It is important to remember that we often tell our employees when we cut their benefits, but we rarely tell them what all of their benefits mean to them.