With inflation at a 40-year high, everything costs more and businesses that have been profitable are not able to keep as much of that money as they’re having to spend more of it. As a result, they start to look for ways to save and reduce spending.
Employee benefits will always be something that’s top of mind for small to midsize business owners. But as the U.S. eyes an economic recession, businesses can start to look for ways to reduce those benefits in order to save money.
Experts say there’s a greater than 30% chance a recession will occur within the next year. The U.S Economy’s GDP shrank worse than expected by 1.6% last quarter, and this was the first decline since the start of the pandemic in the first quarter of 2020.
Benefits like insurance, wellness programs or retirement plans are some of the larger expenses a business will incur. With inflation at a 40-year high, everything costs more and businesses that have been profitable are not able to keep as much of that money as they’re having to spend more of it.
As a result, they start to look for ways to save and reduce spending.
Many businesses offer employees benefits such as health insurance. However, one of the biggest deterrents to offering this benefit is the high cost of premiums for a business and the financial burden it can cause. Health insurance is both one of the most expensive and most misunderstood benefits that companies offer employees.
In times of economic uncertainty, businesses will look for ways to make cuts and reduce spending by cutting other benefits like employee recognition, retirement, rewards programs or cuts to PTO.
THIS ISN’T IDEAL AND ESPECIALLY NOT DURING A RECESSION. CUTTING BENEFITS HAS A NEGATIVE IMPACT ON YOUR WORKFORCE.
Cutting benefits impacts:
- Employee morale
- Loyalty to your company.
Employees don’t want to work for a company that doesn’t have their best interests in mind, and these benefits are consistently what employees say most interests them and makes them want to work for a company.
According to an SHRM survey, in 2022 employers said that health-related benefits, retirement and leave were the most important offerings for employees.
What they found was that this reflected “an increased appreciation for the role benefits play in fostering employee well-being and in attracting and keeping talent in a tight labor market.”
Making sure you continue offering benefits during a difficult time helps you show your employees how much they matter to you and reaffirm the investment you’ve made in them.
FOCUS ON YOUR EMPLOYEES
In a tight labor market, businesses have learned how important it is to focus on their people first.
Employees gained a lot in the past two years because businesses have started to shift their focus to what matters most: their people.
Cutting benefits will cause you to lose the talent you have worked so hard to retain or hire. Business owners know this, and it is why some are electing to endure smaller margins so they can keep the best possible talent in place.
If you continue to focus on your employees during an economic slowdown just like you have in stronger economic times, you’ll continue to win. What matters most is caring for your employees.