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To cut down or not to cut down (employee benefits)?

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Employees are one of the most important resources of any organization. Without appropriately engaged staff, no company could ever dream of being successful, which is why they have to ensure employees are treated as well as material, finance or information resources.

Accordingly, it is essential for the HR management department to ensure the right working conditions are in place and to build a convenient compensation & benefit system, so that everyone gives 110% on the job.

Salaries are great!

Everybody knows how important your typical monetary rewards are. Salary is one of the first factors which is taken into consideration when somebody wants to accept a job offer. Why? Well, on the one hand, there’s the obvious – salaries help meet a variety of basic needs, like food and accommodation. Furthermore, they enhance employee well-being, providing an avenue for hobbies and leisure activities.

On the other hand, monetary rewards do not necessarily contribute to improving staff members’ job-relevant skills and knowledge, and it does not automatically improve the quality of one’s workplace. Moreover, if there are severe monetary discrepancies among equally-skilled employees, due to subjective factors, salaries can encourage unethical employee behaviour.

These are just some of the reasons why in the last few decades, non-monetary rewards, like life insurance, childcare, training sessions, company cars, etc., have become really popular.

Fiduciary benefits can be even better!

Nowadays, most organizations offer interesting and unique non-financial benefits to their employees. For example, Google offers their employees free food (breakfast, lunch and dinner), on-site haircuts and a fully-equipped gym and swimming pool. Sounds good, doesn’t it? But wait, it only gets better!

benefits

There are other companies which are pushing the fiduciary benefits limit even higher. For example, JM Family Enterprises allows their staff free use of the company yachts, while Apple and Facebook pay for female employees to freeze their eggs. Netflix offers everybody’s dream – unlimited vacation time.

At the end of 2019, St. John Properties, one of the largest commercial real estate firms in the Mid-Atlantic, made another newsworthy and generous offer to their staff, by giving $10 million bonus to all 198 of its employees, on their annual holiday celebration.

“I steer the boat, but they’re the ones that run the boat, they are the ones that make the boat go. Without the team we are nothing, we are absolutely nothing.” – Edward St. John, Founder and Chairman, St. John Properties

Of course, smaller companies cannot afford swimming pools for their employees, but they can offer other non-financial benefits, which are just as appreciated and do not come with a hefty price tag. For example, it costs no extra money to boast about an employee’s excellent results in front of other colleagues, or to grant flexible working hours.

However, if you want to go for a small financial investment, then you may consider personalized offerings, admissions to local workshops or even concerts.

Cutting down? Daring, aren’t we?

What happens when an employment benefit is cut down? What happens when an organization cannot go over the top?  In the short-term, it will lead to financial benefits, but in the long-term, it inevitably affects morale, decreases staff productivity, reduces loyalty and helps escalate employee turnover.

If an organization cuts down on benefits, employees may feel that their work is being devalued. They may contend that they are outputting the same performance, quality and amount of work, but they are getting less in return. Employees who feel that their work is not being appreciated are highly likely to experience low morale.

Low morale usually comes hand in hand with a decline in productivity, because employees do not want to work as hard for fewer benefits. What is even more unfortunate, says Laszlo Bock, author of the book Work Rules!, is the fact that the same morale-decreasing mechanism triggers when an organization cuts down a benefit which although may not have been used by an employee, they were aware of the option.

If the cutting down continues, staff members might look after better job offers, from other companies, as they begin to resent the whole process. This sudden increase in employee turnover will automatically lead to greater costs, due to the rehiring and retraining processes that will ensue shortly thereafter.

Final thoughts

Given how fickle today’s employees are, organizations should take into consideration whether it is worth saving money by cutting down employee benefits, as this will indirectly lead to increased spending.

In the long run, it is more profitable to appreciate hard-working staff, however that does not mean being unreasonably attached to those individuals who do not put in the work even with all the bells & whistles, in terms of salary and benefits.

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