Companies Slashing Benefits

By Staff
July 10, 2009

As companies struggle to avoid layoffs by trimming costs, many are now cutting back on employee benefit packages.

The Wall Street Journal reports that some companies are cutting support to adoptive parents, even though such benefits are relatively inexpensive to provide. According to a February survey of 522 employers by the Virginia-based Society for Human Resource Management, adoption assistance fell to 10 percent this year, down from 22 percent in 2006--the lowest level since the nonprofit began gathering information about adoption benefits in 1998.

Families who choose to adopt are likely to feel the consequences. Adoption benefits can provide $5,000 to $20,000 in cost reimbursements as well as paid leave to spend with a new child. According to Rita Soronen, executive director of the Dave Thomas Foundation for Adoption, such support can be a significant factor for adoptive families.

Nevertheless, said Bob Nelson, a consultant on employee-motivation strategies who was quoted in The Journal, such cuts are often necessary to avoid terminating jobs. Therefore, he remarked, "you make the list, you prioritize and you cut."

The Associated Press reports on another benefit being increasingly cut: Many companies are suspending retirement plan matches. And unlike during past downturns when companies eventually reinstated the match when the economy recovered, this time it may never be restored completely.

According to Mark Ritter, an executive director at business consultant Grant Thornton LLP, many companies may not restore the 401(k) match until they clarify the cost of health care. Other employers are considering contributing more to the match in good years and less in bad, or tying the amount of the match to profits earned that year.

The Pension Rights Center, a Washington-based consumer advocacy group, told the AP that it is currently tracking nearly 300 companies with suspended or reduced retirement plan company matches. Included among the list of companies are the Sears Holding Corp., General Motors Corp., Public Broadcasting Service and the American Red Cross chapter in New York. The center is concerned that retirement benefits may eventually become a casualty of the recession.

Even legislators are not immune to the trend. California's Ventura County Star reports that members of the Citizens Compensation Commission voted to reduce benefits to state leaders by 18 percent. The cuts will affect health and dental insurance benefits and car allowances. If implemented, the cuts will save an estimated $15 million over six years.

The move comes after Gov. Arnold Schwarzenegger and legislators cut billions in state spending and are dealing with a $24 billion budget deficit. "It is only appropriate that the leadership show deference," said Ruth Lopez Novodor, a commission member. "Eighteen percent is very fair."

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