Posted by: Professionals In Human Resources Association (PIHRA) | May 3, 2010

Even With a Recovery, Job Perks May Not Return

By Joe Walker
The Wall Street Journal

Workers have seen everything from 401(k) contributions to educational reimbursements cut by their employers during the recession. While some companies are slowly restoring some benefits, experts say workers shouldn’t expect a return to pre-2007 levels any time soon.

“Those days are gone,” says Tim Prichard, head of BridgeStreet Consulting, a benefits administration consulting firm. “Benefits across the board are no longer sacred cows.”

A survey of 522 human resources professionals conducted by the Society for Human Resource Management in February 2009 found that fringe benefit offerings—which include stock options, paid family leave and business class airfare—have decreased significantly since 2005.

And some firms are still cutting. An October 2009 survey of 371 companies by SHRM found 39% of respondents were either “somewhat likely” or “very likely” to reduce benefits offerings in the next six months.

As long as unemployment remains high, there will be little incentive for employers to bring back perks that have been lost, experts say.

From “past downturns, we know that benefits come back slowly when the economy recovers and the labor market gets tight—competition for labor does it,” says Peter Cappelli, a professor and director of the Center for Human Resources at the University of Pennsylvania’s Wharton School. “So until that happens, the [benefits] may not come back.”

Education reimbursement and training are often cut early. Companies who offered reimbursement for undergraduate and graduate education decreased by 4% and 5% respectively, according to SHRM

Mr. Prichard says that he has seen companies cap tuition reimbursements at $2,500 for employees who just a few years ago would have had their master’s degrees almost entirely paid for. A survey conducted by the Graduate Management Admission Council, which administers the GMAT admission test for M.B.A. students, found the percentage of U.S. employers offering tuition reimbursement or scholarships to recent M.B.A. graduates declined to 29% in 2009 from 37% in 2008.

Visteon Corp., for example, an automotive supplier based in Michigan, suspended its tuition-assistance program, which had helped fund undergraduate and graduate degrees for 50 employees, in October 2008, seven months before it filed for bankruptcy. The program remains suspended as the company focuses on emerging from Chapter 11, a spokesman says.

Companies offering adoption assistance also fell, from 20% to 10%, according to the SHRM study. And so far, few are adding the benefit back, experts say.

“I had one client who had a very progressive adoption program where they provided reimbursements for adoption expenses,” says Carl Mowery, managing director of LECG, a corporate consulting firm. “When they started cutting back, that program was cut.” The company, with 1,000 employees, shed $100,000 in annual costs by eliminating the program and has no plans to restore it.

Other popular and relatively inexpensive perks that had been expected to grow, have declined or come to a standstill. For instance, as telecommuting technologies have became cheaper and more accessible, many workplace advocates believed the number of companies that would allow employees working remotely would rise. But instead, over the past five years new telecommuters have been offset by employees returning to the traditional workplace, according to a June 2009 report by International Data Corp., an IT consulting firm.

The report also found that some businesses have “reined in support for alternative work arrangements, with new initiatives essentially on hold and existing programs under review.”

Employees are more hesitant to work away from the office when they are anxious about losing their job, says Justin Jaffe, an IDC analyst. “When times are tough, telecommuters will take refuge in the corporate office, maybe feeling vulnerable or exposed in not being where the action is.”

From 2007 through 2009, the percentage of private industry workers with access to flexible workplace benefits remained steady at 5% according to the National Compensation Survey, conducted by the Bureau of Labor Statistics.

Some firms are trying to soften the blow of salary freezes or benefit cuts by adding voluntary benefits, says Chris Hill, CEO of PerkSpot, a Chicago company that administers voluntary, or employee-paid, benefits and discount programs for companies and public institutions—which cost the firms little or nothing.

Mr. Hill recently worked with a large national retailer who added a voluntary auto and home insurance program, along with access to discounts with merchants like Dell and Target Corp. Mr. Hill says the number of employees using these programs increased by 113%, to nearly 372,000 in 2009.

The SHRM survey points to one thing that might be gone for good–or a very long time: Holiday parties. The percentage of respondents who said that their company held a holiday party fell from 87% in 2006 to 81% in 2009, with 15% saying that they have plans to reduce or eliminate them in the next year.

Employees at the law firm of Fennemore Craig in Arizona had gotten used to lavish holiday parties held annually at a fancy hotel. But the recession prompted the firm to cancel that party in 2009 and instead throw a potluck in its offices.

“Will there come a point where we will bring back the big large-scale holiday parties? Maybe,” said James Goodnow, an attorney and chair of the firm’s retention committee. “I think we are cautiously optimistic that things will continue to improve, but no one knows what’s going to happen with the economy.”

Still, one benefit that is showing signs of life is matching contributions to 401(k) plans. Many companies suspended that perk over the last few years. But in February, the benefits consulting firm Hewitt Associates surveyed 162 mid- to large-sized U.S. companies and found that 80% planned to restore matching contributions in 2010.

According to the Center for Retirement Research at Boston College, 24% of the 2.4 million employees affected by matching suspensions since 2008 have seen the suspensions lifted. Still, some companies have only partially restored matching funds. At FedEx Corp., matching contributions were halted in early 2009. When they were restored in December, the contribution was half of what it had been prior to the recession.


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