Communication is crucial when adding, removing, or changing benefits

Posted February 1, 2017

By Ed Zalewski, PHR, editor, J. J. Keller & Associates

Employers offer competitive benefits to help attract qualified candidates and retain valuable employees. To achieve these objectives, new benefits sometimes have to be added. And if employers face a need to cut costs, they may need to reduce or eliminate a benefit.

When employers add a new benefit, the offering is usually announced with much fanfare. Employees generally appreciate getting something new, whether a new bonus, increased 401(k) matching, or paid sick leave.

Over time, many employees begin to see the benefit as an entitlement — and benefits are, after all, part of total compensation. For example, if an employer offers matching 401(k) contributions, more employees will participate to get the matching funds. After a few years, employees come to expect the matching funds as part of their total compensation rather than viewing the money as an employer contribution to their retirement.

If a benefit must be modified, employers should be prepared to communicate the reason for the change and highlight any advantages. And if a benefit must be eliminated, employees will want to know what they are getting in its place.

During the economic downturn, some employers eliminated 401(k) matching, which likely caused frustration among employees. Some employers explained that the change was needed to avoid layoffs. Employees who understood that their employer faced the choice of layoffs or benefit cuts may have appreciated the fact that they kept their jobs, but they still weren’t happy about the loss.

No matter how thorough the communication or how valid the justification for cancelling a benefit, some employees will have hard feelings. Most will want to know what’s in it for them. Ideally, the employer should roll out a replacement benefit immediately, even if the new offering is not as valuable as the eliminated benefit. Employees are more likely to accept the loss of a benefit if they understand that the company is doing its best to provide something else.

Even if a replacement offering offers greater value, some employees may be reluctant to accept the employer’s claims about the improvement, particularly if the new benefit is less tangible. Employees losing something of known value must trust the employer that they are getting something equivalent or better. Many employees may remain uncertain until they have enough experience with the new offering to fully understand it.

About the author:

Ed Zalewski is a certified Professional in Human Resources and an editor at J. J. Keller & Associates, a nationally recognized compliance resource company that offers products and services to address the range of responsibilities held by human resources and corporate professionals. Zalewski specializes in employment law topics such as the Fair Labor Standards Act, employee benefits, and discrimination and harassment. He is the author of J. J. Keller’s FLSA Essentials guidance manual and BottomLine Benefits & Compensation newsletter. For more information, visit www.jjkeller.com/hr.