During the recession, my employer, a firm in the financial industry, eliminated raises for employees at the Vice President level and above for one year. The company, although continuing to perform well compared to its peers, cut back bonuses and other benefits. It’s easy for employers to demand higher productivity for less compensation when the job market is stagnant and the economy is threatened.
“You’re lucky to have a job” was the prevailing attitude. Many of my co-workers had family members or knew people who were out of work during the recession, and there was a lingering fear that, particularly after some internal consolidation, any of us could be out of our jobs at any time. Some were holding onto their jobs for dear life.
The power balance between employer and employee is always tilted in companies’ favor, but never more than during a period when the economy is falling apart. Unemployment may be at 8.5%, lower than during the height of the recession, but this is still high, and employees are still willing to put up with cutbacks just to keep their jobs.
What appears to be a short-term gain for an employer — reducing expenses in human resources, salaries, and benefits — can be a long-term loss. The recession ushered in a period of New Frugality. Consumers used credit cards less often and companies cut back spending and hoarded cash. The corporate balance sheet was important, and companies appeared stronger by reducing expenses to ensure profits for shareholders. Employees suffered as a result, and the stagnant — or in some cases, decreasing — compensation will not easily be forgotten.
Eventually, the job market will swing in the other direction. The top talent will feel no loyalty to the company that didn’t respect its workers during the recession, and they will leave for greener pastures.
The Wharton School highlights several recent surveys, showing that the short-term gains companies achieve by neglecting the benefits of their employees will likely result in long-term difficulties.
- 36% of workers want to leave their companies.
- 43% of human resources managers are concerned top employees will leave.
- 35% of companies in the United States have smaller staffs than before the recession.
- Companies have replaced full-time staff with temporary workers.
Companies cut compensation more for lower-level employees than higher-level, because executives view the average working middle class employee as easier to replace.
A company’s employees, literally its “human resources,” are the most important assets that a company can invest in. Proper handling and training will present a great return on investment. Spending money to support and enhance the lives of and benefits for employees keeps them engaged. If an employee believes he or she was treated well and respected during a time of economic upheaval, when employees at other companies are sharing their stories of frustration, the employee is more likely to appreciate the employer.
How has your employer treated you over the past few years? Have your compensation and benefits been scaled back? Will you stay when you know it will be easier to find a job?
Updated June 24, 2016 and originally published January 19, 2012.