Should Workers Be Worried About a Perk-Cession?

​Made wary by layoffs and fears of a recession, some companies are not only cutting jobs, they're also cutting employee perks.

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an Unstable Economy

On the chopping block are some of the benefits that once kept employees happy and helped increase loyalty: free food, well-being days, home office stipends, commuter benefits and family-friendly benefits such as fertility assistance.

Google is cutting back on employee perks like fitness classes and even some office equipment in an effort to trim costs, CNBC reported. Meta, parent company of Facebook and Instagram, which in March announced plans to cut an additional 10,000 employees following the 11,000 layoffs it made late last year, ended free laundry and dry cleaning services for employees. Meta also is tapering back on one of the most coveted perks: remote work. At the beginning of the year, Salesforce ended the "well-being day" it began offering employees during the pandemic, which allowed them an extra paid day off every month.

"It's a lot of the major tech platforms, which are some of the biggest organizations in the world, that are making these sorts of high-profile cuts," said Tony Guadagni, senior principal in the Gartner HR practice at Gartner.

Momentum, though, may be growing among other firms. Recent data from Care.com finds that nearly half of companies are eying cutting benefits to prepare for a possible recession. Those benefits include adoption and fertility assistance, commuter benefits, health and fitness discounts, and home office stipends, according to the caregiving provider, which for results surveyed 500 U.S.-based human resource leaders and professionals. Higher-than-average planned cuts are happening in the food and hospitality, retail, and manufacturing and construction sectors, the report found.

"During the Great Resignation of 2021 and 2022, employers were desperately courting prospective employees and wooing existing ones, relying heavily on enhanced benefits to attract and retain workers," Care.com researchers said in their report. "But in 2023, faced with an economic slowdown and a return to at least a semi-traditional workplace, some have been tempted to revert to old practices."

The cuts come as the pendulum swings from a hot employee-driven market where perks were plentiful to a fragile one as employers fear and prepare for a potential recession. It's not a rare phenomenon: Benefits and other employee perks often swing with the economy, going from common and competitive during strong economies that see employers competing for talent to scarce when layoffs loom.

Other factors contribute to the cuts, including a shift away from pandemic-era perks that were more common in 2020 and 2021—such as stipends for home office supplies or well-being days a la Salesforce. Employers also are doing away with some onsite benefits that aren't as popular simply because more employees are working from home.

A Worrisome Trend or a Course Correction?

Undoubtedly, benefits cuts are occurring. But is the trend going to grow?

Maybe only to an extent, some experts say.

So far, a lot of the cuts are happening among bigger tech firms with plenty of low-hanging fruit to trim. They often happen in parallel with layoffs and are a way to prevent further job cuts, Guadagni said.

But core benefits—think health care plans, retirement contributions and offerings, paid time off, parental-leave programs, and more—are more likely to be left alone. That's both because of employee expectations that have surged as a result of the pandemic and because the job market still remains competitive despite the layoffs seen among some companies.

"The cuts that I've seen to this point tend to fall more under the category of what I would consider to be perks rather than the traditional benefits," Guadagni explained. Those include free food, onsite gyms and transportation benefits.

"What I've seen, both in the data that we have and in the conversations we've had with our [employer] clients, is that we're actually not seeing a lot of changes to benefits," he added. "It's more about preparing or being ready to defend those investments and show a direct and tangible return on investment of that offer, if needed."

"Leaders are really hesitant to cut core benefits," he said. "I don't think they're going anywhere."

[SHRM members-only HR Q&A: Should HR strategy be altered to account for economic trends?]

Maria Trapenasso, human capital solutions national practice leader at NFP, a New York City-based benefits consultant, agreed, saying that benefits and HR leaders are reluctant to eliminate offerings in general, but especially stalwart benefits or those that are especially popular among employees.

Research shows that health care, retirement and paid time off usually top the list of most-desired benefits from employees. But offerings like paid parental leave, which has been growing lately, will also be unlikely to diminish in popularity, she said.

"Employers are very, very hesitant to take something away that they've already given to employees," Trapenasso said. "It doesn't feel good. It's horrible, and it hurts morale. They will find other ways to cut costs, rather than take something like that away." She also predicts that because there has been a lot of momentum behind certain leave benefits and caregiving offerings, they will grow rather than become less common among employers.

In fact, some data seems to indicate that benefits investments are growing rather than decreasing, although it's too soon to tell if growth may plateau in light of economic concerns. Gartner data finds that benefits budgets are seeing 1 percent to 4 percent increases at most organizations.

From 2021 to 2022, Guadagni said, just 2 percent of employers said their budget decreased. Forty percent said it stayed the same, and more than half said it increased. "I haven't heard anything suggesting that's going to be substantially different for this year," he said.

In general, employers are still concerned about staying competitive—and they're still leaning into the total rewards package to do so, Guadagni said.

"They're really trying to focus not just on compensation; they want to have a compelling benefits package and a compelling total rewards package that's going to attract and retain," he said.

Tim Allen, CEO at Care.com, said despite some of the potential benefits cuts organizations said they might consider, he expects smart organizations to think longer term about what will sustain them during economic headwinds.

"In challenging times, smart leaders hunker down and hone in on what they know will keep their businesses resilient and drive the bottom line," he said.