Evolving Benefits and the Lack Thereof

A new report by CNN discusses the shift in company-paid employee benefits over the past five years, as employees have been confronted with the growing need to take on the cost of some portion of their own benefits.  Medical insurance has been cited as the most commonly and most often updated benefit, as has a reduced or, in some cases, completely eliminated, 401(K) employer match.  Such changes have been forced upon employers in the face of tough economic times, and some forecasts indicate that more than 50% of large organizations may drop health care coverage altogether in the next five years if economic conditions and medical costs do not improve.  Considering the new IRS ruling increasing the personal out-of-pocket contribution limit for Health Savings Accounts for 2013, this forecast may very well be accurate.

Notwithstanding, benefits continue to cost organizations huge amounts of money, and managing these in a cost-demanding environment is a substantial investment in itself.  Using a recent announcement by Hewlett Packard that the organization's restructuring efforts will cost 27,000 employees their jobs, consider the team responsible for that layoff.  This team will presumably include many human resource professionals, employment counsel, payroll representation, and a dedicated group of individuals tasked with designing and managing the ongoing benefits for this group of 27,000.  Further, as noted in an opinion piece about the HP layoff, those HP-ers who survive the massive force reduction will be faced with increasing job demands and greater overtime requirements.  

Severance benefits, while not as drastically affected over the past five years as have been medical benefits, are often on the chopping block as organizations strive to reduce costs.  However, because severance benefits are too often viewed as an entitlement rather than a benefit, few companies are swift to update severance benefit plans even in the times of struggle.  Growing healthcare costs have forced the burden of the costs partially onto the beneficiary.  Why has the business world been so reluctant to update a benefit so costly and outdated?

Modernized severance plans don't have to cost employees a dime, unlike modern medical benefit plans.  Modern severance plans can, however, restructure the IRS tax burden of a separation benefit and be less costly to both an organization and an individual.  Modern severance plans can also integrate sources of funding such as state and federal unemployment benefits provided to involuntarily-separated individuals, allowing a company to perhaps save costs and terminate fewer employees, or perhaps even enhance a separation benefit awarded to a terminated individual to provide financial support for a longer amount of time.  Further, modern severance plans can be administered by an outside party, eliminating the need for a (costly) internal "layoff team" and leaving the administration and legal regulation of the plan to an outside vendor.

Thinking again about the HP restructure, what could potentially amount to a billion-dollar total severance payout could be reduced exponentially by simply adopting a modern and cost-effective separation benefits plan.  And just a though, perhaps severance benefit savings may allow those leftover employees, still with greater workloads and more overtime, to have reduced out-of-pocket healthcare costs.  Benefits that are actually beneficial!