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Pulling Back on Perks: Reducing Employee Benefits

For recruitment, staff retention, or simply creating a positive work culture, employers often provide employees with benefits or perks that exceed employment standard minimums. This may include offering employees sick days that not only exceed statutory minimums but are also paid, or vacation benefits for new hires greater than the standard two weeks.

It is a great feeling for employers to know they can provide valuable perks to their employees and stand out from the competition. But demands for a business’s services can fluctuate—a decrease resulting in reduced profits, or a rapid increase requiring additional staff that increases the costs of perks. There are many situations that may force an employer to review the benefits they provide to their employees, and the conclusion might be to reduce benefits for the business to succeed. Is that even possible, though?

Yes, it is possible for an employer to reduce an employee’s benefits, as long as they do not fall below the legislated minimums. However, while reducing employee benefits is possible, it is anything but simple, and could lead to legal action by an employee. Any change that may alter an employment agreement in a fundamental way may be seen as constructive dismissal, which could be costly to an organization if proven in a court of law. These risks apply to both written and oral employment contracts, so not putting it down on paper does not protect employers from potential constructive dismissal claims.

Thinking of it from an employee perspective, it can be hard to understand why their employer is pulling away benefits. They likely don’t have access to the same high-level financial information that you have. Employees also become accustomed to the benefits they have been receiving and may feel a sense of loss if they are taken away. It may be upsetting, but if done correctly, employees will come to terms with their new agreement.

Since every situation is different, coming up with a blanket solution is impossible; however, when an employer wishes to decrease benefits, there are some basic things to consider. Download our FREE Decreasing Employee Benefits Guide, which provides some “must knows” before you change employee perks.

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