Being for the Benefit of...Benefits

by TMT Editor

Just over a week ago, we looked at analysis suggesting to companies that they might save millions by suspending their 401(k) matching for just one year. The advice, of course, was meant in good faith as a tactic to weather this time of economic recession; the implications of such a move for employee morale, however, are potentially disastrous, and any savings can be eclipsed by equal losses in productivity. Top talent has a way of losing its morale, after all, when an employer shows seeming disregard.

Luckily, this seems to come intuitively to most companies, a Towers Perrin survey of close to 500 HR and benefit executives has found. Looking at employee benefits, Towers Perrin's survey shows that despite the pressures of the economic crisis, most U.S. companies continue to view their retirement benefits package as a vital part of their workplace relationship with employees. While companies appear to be trying to keep their programs as consistent as possible, the survey results do reveal trepidation in the workplace. Between 30 percent and 60 percent of survey respondents say that their employees were postponing plans to retire, reducing participation in 401(k) plans and increasing hardship withdrawals and loans from the plan. Only 7 percent predict any uptick in 401(k) participation.

In the face of extraordinary economic challenges, this level of commitment to the unspoken employee-employer contract is encouraging and bodes well for the morale of knowledge custodians, just the people these companies need to retain in preparation for an eventual rebound in the marketplace. Even so, it is this last finding in the Towers Perrin study, the paltry number of respondents expecting an uptick in 401(k) participation in the near future, that portends the temptation organizations must resist moving forward: Employees are already making tough changes to their retirement plans on their own. For an employer to then match its employees' actions by scaling back benefits would communicate only pessimism and prompt a precipitous decline in productivity among the otherwise most productive in their workforce.