Penny pyramid

Deloitte, the international consulting firm, has some very helpful white papers on its Web site, grouped into categories like corporate governance, CFOs, and chief human resources officers

One that caught my eye recently is called "Reducing Benefits to Conserve Cash." The white paper explains that when short on cash, corporations can employ temporary ways to save money by curtailing benefits.

No one likes to see benefits reduced, and the white paper admits that doing so can have a harmful effect on morale. But when the alternative is layoffs, sometimes reducing benefits is the best among several unpleasant options.

What are the ways that benefits can be reduced?

  • Eliminating defined-benefit pension plans
  • Reduction of 401(k) matches
  • Passing through of healthcare inflation
  • Creative solutions like providing a single dollar-amount 401(k) contribution rather than a match that is indexed to salary

The report offers some good advice for staying strong during hard times:

The most important thing for a CFO at this moment is to step back and be sure they understand all the parameters they can work with. Where can you chip away to get the biggest bang for your buck and minimize damage either to current morale or long-term reputation? What are the long-term consequences of a policy choice for the company and its employees? What creative alternatives, from changes in timing to creating a fixed contribution regardless of salary or non-cash contribution, best meet the company's overall strategy and objectives? Changes to employee rewards can have adverse retention effects. It is important to ensure the policy changes help retain employees you consider critical talent.

Read the white paper here.

 

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