If you were to take a survey of any given 100 people that you stop on the street, I'll bet that 90% of them believe that one or more of the following benefits are required by law:
- Paid vacation
- Paid holidays
- Premium pay for working on a holiday
- Health insurance
- A 401(k) plan or pension plan
And probably a good many others.
In actual fact, none of the benefits above are required by federal law. One or two of them are required by state law in a very few states (specifically, premium pay and health insurance), but by and large these are benefits that are completely optional for the majority of private employers, barring a collective bargaining agreement or contract that says otherwise. But even employees who understand that they are not mandatory benefits have come to think of them as entitlements.
We all understand that not providing these benefits will make recruiting more difficult. But it is nonetheless true that the economy is hitting small and medium-sized employers badly, and some are being forced to cut down on benefits. Unfortunately, employees who have come to think of these as entitlements are having a hard time accepting the loss. They don't understand that the employer has to make cuts somewhere, and sometimes it's a question of losing their benefits versus losing their job.
If you find yourself in the position of needing to cut your budget, here are things you might want to consider before you downsize your benefits plan.
- Review your company handbook with your corporate counsel. Make sure that nothing in the handbook or benefits plan documents is written in such a way as to create a contractual obligation.
- Check your offer letters, again with corporate counsel. While it is rare for an offer letter to rise to the level of a contract, it can happen. Make sure that you haven't made any promises that will come back to bite you later.
- Grandfathering: Consider leaving the existing benefits in place for employees hired before such and such a date; provide the lesser plan only to those employees who are hired after the date of the change.
No matter what changes you end up making to your plans, make sure you share the information with your employees clearly. If possible, explain the reasoning behind the change: "With the loss of the McCarter contract, we have to reduce our budget by 30% and this is the only way we've found to avoid layoffs."
It won't make the employees any happier about the change, but if they understand the reasoning and the alternatives, most will be accepting.
Catherine Bannon is an HR consultant in Marshfield, MA (catherine.bannon@gmail.com). Bannon worked for 10 years in HR management before starting her consulting practice
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