The downsides of cutting employee perks

With continuing global uncertainty economy-wise, many companies are not only easing off recruiting but starting to cut back on company benefits.

Companies such as Google, Apple, and Twitter, which are well-known for office perks such as sleeping pods and free food, were the first to cut the perk-cession trend.

As further proof, a recent poll has revealed that one in three Australian employers decreased perks in the last six months.

But what affect will this have on employee morale and overall company culture?

“It really depends on how it is handled,” said Catherine Kennedy, NSW managing director of people2people Recruitment, which did the survey.

“If perks are dismantled without any explanation or discussion, then employees may become unsettled, or even fearful about the health of the organisation and the security of the role. In the absence of information, people will often jump to the most negative conclusion.”

The rise and fall employee benefits – and how to handle the transition

People2people’s 2023 Annual Salary and Employment Report revealed what employees care about most (in brackets), with employers investing more heavily in: training and development (64%), career opportunities (62%) and work purpose (62%).

At the other end of the scale, there is a big decline in management support and trust (69%), work-life balance (64%), company culture (62%), and salary and bonuses (52%).

If employers opt to change or dismantle perks, it’s important to take staff on the journey with them, Kennedy said, which means outlining the rationale for the change, and ensuring there is a real focus on the individual needs of employees — particularly around their own development and career ambitions — and that employers take proactive steps to ensure a positive culture.

“If not handled carefully, there is a risk that company culture could really suffer,” she said.

“Lack of transparency and poor communication can quickly impact culture negatively, however, if employers communicate effectively with their people, and importantly, ensure that they maintain a focus on fostering a positive environment, and a commitment to valuing and developing their people, the impact to culture can be minimal.”

A one-size-fits-all perks approach won’t necessarily lead to happy, engaged, and productive employees, Kennedy said.

“It’s evident from our research that employees value a tailored approach that provides them with learning and development, and opportunities to add to their skillset.”

If resources are limited, companies can create these opportunities in-house, and this is likely to be better received by employees compared to access to a gym they rarely use or a weekly fruit bowl, she said.

“Those things are nice to have of course, but the most important thing is to show employees that they are valued, and that the company is invested in their future — it doesn’t necessarily take expensive perks to achieve this.”

Employee recognition, leadership also important

If the economy rebounds in 2024, companies may ask themselves if they really need to return to adding employee perks.

“When the economy strengthens again, I'd treat the subject of returning to perks in the same way,” Rebecca Houghton, CEO of BoldHR, said. “What's valuable and important to them is where you should invest - all else is just a distraction.”

Discounts are great, but so is recognition, real flexibility, and extra holidays, she said, citing stats from UK-based Perkbox.

“Half of those don't hit your profit and loss but they are an effort for managers to deliver on — so supporting your leaders to provide more recognition and lead with true flexibility has greater return on investment.”

There is no question that all the perks in the world could never outweigh good leadership, she said.

“If I only had a few shekels to spare next financial year, I'd be spending it on my leaders.”

Purpose and clarity go a long way to engaging and retaining your staff,” Houghton said, “but in economic uncertainty, trading purpose for perks is going to be a tough sell. Commitment to visibly reducing workload, and increasing genuine flexibility is a more tangible trade off.”