Benefits being affected by the economy?

[DangerMouse]

I'm wondering how common it is at the moment for companies to downgrade their benefits package using the current economic climate as an excuse. Where I work they are implementing the following:

1. If you want the PPO you have to pay the difference between the POS and the PPO. For me that is an additional $200 per month.
2. They are terminating the 401k match and changing the vesting schedule for new employees from immediate to 3 years.
3. They are proposing a 5% salary cut across the board and requiring employees to work additional hours.

So how common are these type of changes in the market at this time?

[bow-tie]

Wow... that sucks. I haven't seen anything like that where I work, but nothing companies do to pump the bottom line and increase those executive bonuses would surprise me.

[podey]

Jan 1 2008 my company went to a new benefits program, which stinks. And the coverage for out0of-network doctors is abhorent. They are in the middle of a cost cutting phase, of course.... But also of course, they are still charging us the same monthly premium for the insurance....

[lucija]

Originally Posted by DangerMouse

2. They are terminating the 401k match and changing the vesting schedule for new employees from immediate to 3 years.

Just curious, what does that mean? There's no match, so what is being vested over 3 years? Can you loose your own contributions (I hope not!)?

[ziggy29]

#1 is pretty common. The employer will put a certain amount per employee/family into the coverage, and if you want something that costs more, you pay the difference. That's SOP these days for most companies, I think.

#2 sucks. I suspect they're trying to get some employees to leave voluntarily so they don't have the hassle or cost of involuntary termination. But if you're always vested in your own contributions, and there's no match...what is there to vest?

#3 sucks. Less pay for more work? Again, see #2. I think they are trying to get a lot of people to voluntarily separate.

Then again, it also depends on the local economy. If a bad employer thinks you have no other choices and there aren't other jobs out there, they have leverage and can screw you. (Then again, when the economy improves, they deserve no loyalty.)

This is why it's so nice to have FI even if you want to keep working. If I were FI and I worked at a place where they did this, I'd be packing up my stuff and giving notice that same day.

My employer made a LOT of benefit changes, including an HSA option which I took. They also doubled the cost of dental and gave us the worst dental plan ever (MetLife).

[kombat]

Originally Posted by DangerMouse

3. They are proposing a 5% salary cut across the board and requiring employees to work additional hours.

Danger, Will Robinson, Danger!

I'd polish up that resume. Looks to me like that company is going down, fast. I've been through a couple large-scale corporate "contractions," as well as a couple full-blown collapses. The "less pay, more hours" is a classic sign of a company that's in big trouble. Even if it is able to muddle through and remain solvent, it will constantly be pinching pennies, you will have difficulty advancing, and the perks will never be re-instated.

To answer your question, yes, both my wife and I have been with companies who cut back on benefits when times got tough. In every case, we left the companies (being laid off, in two cases) and moved on to other opportunities. After being laid off once in the past, I no longer stick around to wait for the company to crater. When I see the warning signs, I put the feelers out and move on.

[FIREdreamer]

My wife's company has cut the 401K match by 25%. Bonuses have also been cut, but they stepped up deferred compensation (like stock option grants) especially for key employees. NO changes so far to health benefits.

[aworkingrachel]

Cuts in salary and more hours? Hideous!

My company just introduced an HMO and increased a couple of the copays on the PPO...but employees still don't have to pay *anything* for the health insurance.

[Midpack]

Unfortunately not as uncommon as you might think, and follows a decades long trend that will never be reversed IMHO. But it sure hits home when it happens to you/your company doesn't it? It was a shock to me when they killed off our pension 15 years ago when I had 17 years into them.

I think it's more likely a sign the company is doing that badly due to the poor economy than the sign of an otherwise healthy company just taking advantage of the economy to make cuts - but the latter is certainly possible.

[DangerMouse]

See my situation is further complicated in that I work in Finance so I know exactly what the state of the company is, and they can well afford to keep the 401k match. Yes, the economy is bad and they have had to revise their revenue goals etc., however the financial situation is not that bad that they have a need to make these cuts.

There have been a couple of rounds of layoffs, but it has been a bit of a futile process as instead of looking hard and slimming down at the top, they old boys have looked after themselves and kept trimming the admin staff which costs the company next to nothing. They have far too many fat cats at the top who do very little and are overpaid for what they do, however none of them will jump off the gravy train. We have high level managers who manage teams of 1, and that is not an isolated case.

Our original plan was to FIRE in June 2008 however with the decline in the market our portfolio is not where we want it to be and that combined with other circumstances made us decide to stay on a bit longer. After discussing with DH I am thinking I will try and hold on for another 3 months then call it quits. The killer will be having to pay for health care as DH's company ceased their plan recently. I figure I will get some temp work, if I work one month out of two that would cover our health insurance premiums and a bit extra.

[jazz4cash]

Whats uncommon is to get hit three ways at once. Healthcare costs are very unpredictable, but for example our company told us 12 months in advance that we would be responsible for increases and then we had another 12 months before the changes took effect. The 401k match is a pittance and I suspect the negative impact on morale outweighs any benefit to the bottom line. Our match rises and falls with the economy, but I think we always had at least 25% I suspect there's more going on that is not transparent, management is super short-sided, or both (e.g. you work for countrywide). With so many changes announced so suddenly, I would hope management would make it clear some cuts would be restored as quickly as possible.

[ziggy29]

Originally Posted by jazz4cash

With so many changes announced so suddenly, I would hope management would make it clear some cuts would be restored as quickly as possible.

I suspect with so many cuts announced so suddenly, they plan to cut to the bone in a few months and want to get as many voluntary terminations as they can before that happens. Forced layoffs cost money.