Cutting back on benefits is a ‘double-edged sword’ – How can we deal with it?

Cutting benefits and perks also impacts employee morale.

The last few months have been quite hard on the technology sector. Recession fears have led them to cut jobs to keep the business afloat, and now businesses are cutting down on certain employee perks, which made them an aspirational company to work for. Recently, Meta, the parent company of Facebook, decided to cut down its budget on health and wellness programs for their employees, coupled with a Lyft subscription and complimentary laundry service. Even Google had to cut some of its perks, such as free meal services to employees. Moreover, Salesforce announced that it would be rolling back its employee mental wellness program, which started during the pandemic. This is not something new. We saw these same companies behaving similarly during the 2008 recession in the US. First, people lost jobs, and then employee benefits and perks took a hit.

But cutting down on benefits is like a double-edged sword. It hurts the employees and the organization as well. Employee satisfaction takes a big hit when a company rolls back its perks and benefits. What can we do in such situations?

Cutting perks – How it becomes a ‘double-edged’ sword

Though companies, to keep the business afloat, employers do end up cutting perks and benefits budgets. On the one hand, it becomes key in keeping the business alive, but on the other, employee morale takes a hit. Businesses take such measures, which might be a short-term crisis management action. In the long term, it will impact you. Some employees will feel devalued and demotivated. As a result, they will be the first to leave the organization when things return to normal. This means that the organization may lose critical talent.

Employees will feel devalued

Employees feel valued when given the joy of benefits and perks, which give them above and beyond pay, care for their health and family, and respect their work-life balance. They take pride in the fact that the company cares for them. But as you might take these benefits away suddenly, they will feel devalued, and a feeling of resentment will occur. Taking away such perks and receiving nothing in return makes the employees feel that their relationship with their employer is transnational. When the company was doing well, they cared for their employees. But when bad times came, cutting perks, salaries, and jobs seemed like a brutal move, and people started to feel treated like just ‘resources’ rather than humans.

Feeling of betrayal

When an employee joins a company known for offering great benefits and perks to its employees, they get attracted by how the company takes care of its people. When the company decides to take back these perks, they will feel betrayed. They might lose purpose and motivation to perform, which will impact their quality of work at the workplace.


When employees are being laid off, and benefits and perks are being cut, what do you think will happen in an employee’s head? Doubts! More than that, there is a lack of trust in its employer to take such tough calls. They will think things are wrong and may not want to work for you anymore. In such conditions, productivity or the ability to deliver work reduces. Which in turn lowers the productivity level of employees.

The risk of mass attrition

When a company goes through a bad time and takes such cost-cutting cost-cutting measures, the employees lose their trust. They start to believe that the next could be them, so it is better to switch sides before the axe falls on them. So when things start to improve, there will be a huge number of resignations, and the company will find it hard to stop the outflow of people in the organization.

Can companies do without cutting off benefits?

In such challenging times, we cannot really make our employers the villain. One has to take certain business calls to keep the company alive. It is like how our body functions. When a certain part of our body becomes poisonous, we have to get rid of that part so that the poison does not reach other vital parts of the body, like the heart. Similarly, we have to cut our workforce and certain budgets so that the company remains profitable. But can we refrain from taking such measures?

As per the data, the employee benefits budget of a large firm would come at 30% of the entire payroll. But this figure might vary as per different sectors and businesses. Certain businesses have a high cost on people while others may not. However, the average budget for employee benefits does not look to be that huge, so depending on the situation, if possible, employers should not cut these activities.

How to do it right

Employers should do away with withholding their employee benefits budget. But if one has no choice, no worries, you can still make it through if you do the cutting job the right way without hurting your people.

Decide which benefits and perks to keep.

When it comes to cutting costs on perks and benefits, one needs to be strategic about it. You cannot just slash everything down without giving it a thought. Certain employee benefits are vital, such as health care insurance. Try not to cut on that—similarly, other perks like flexible timing, remote working, or team-building activities. Do not cut such perks to keep your employee’s morale high. In fact, sit with your CHRO, benefits advisor, and CFO to decide what benefits to keep and what not to keep. Some answers may just come through the demographic of your employees. If you have a young workforce who do not have children, having a childcare policy may not make sense, but cutting the budget on higher education benefits may harm you. We need to balance the needs of our employees and the company.

Be open and transparent with your people.

Having open and transparent communication with your people is crucial. Keeping them guessing can make things worse. First, it is essential to take your managers and leaders on board. Be open with them and explain what the company plans to do, how it will be done, what the impact will be, and why it is being done. Then, it gets easier to take employees in confidence. Leaders and managers can make things clear in a much more effective way. Hold focus group discussions to reveal these facts. And tell employees what the alternative will be if this is not done. Such as ‘cutting down on salaries or more layoffs would have been done if we don’t do this.’

Be clear and tell the ‘What, why, and how’ so that people are prepared. In fact, some employees may have to rethink their home budgets since some benefits will be rolled back. It is better to tell employees as early as possible.

Show empathy

No one wishes to hear the bad news. They are always tough conversations. But train your managers to deliver this message with empathy. If one delivers the message with warmth, care, and transparency, there is a higher chance that the emotional outrage among the employees will decrease. We must understand their side of the story and their challenges. When that happens, the employees will also empathize with the commercial challenges of the company.

Give extra benefits if possible.

This might sound crazy. Since we are cutting benefits, how can we add more? There are certain benefits and perks which are less costly or, rather, have no cost at all. These benefits include flexible timing, paid leaves, remote working, and many more. These small gestures can add more colors to your rewards strategy and keep your people happy.

Before taking drastic steps such as cutting perks and benefits, it is better to also consider the consequences. Rather, cutting benefits will cost you, and we need to strategize how we can go about it before we take any such drastic steps. It is understandable that it is difficult for companies to spend too much on such activities during tough times. Rather than bluntly cutting the existing benefits, employers can evaluate giving meaningful non-monetary perks that do not involve a high monetary value. Focusing on giving a better work-life balance, career development, or enhancing the culture are some great areas to work on to start with.