Companies are stealthily cutting benefits to afford higher wages. What employees should know

Workers may have rejoiced over big pay raises in the last two years, but the downside is they’re losing non-cash company benefits, according to job and recruiting site Glassdoor.

In 2023, the top three benefit cuts were in mobile phone discounts, charitable gift matching and tuition assistance, Glassdoor said. Companies are looking for ways to cut costs to pay for huge wage hikes doled out to attract and retain workers and elevated inflation over the past few years. And with the economy slowing and competition easing for workers, companies are doubling down on trimming fat in 2024, Glassdoor said.

As companies pare back benefits, Americans will have to pick up the tab.

“A lot of these smaller benefits add up to an important part of household budgets,” said Aaron Terrazas, Glassdoor chief economist. “It’s another weight on consumer spending going into next year.”

Why are companies cutting benefits?

Companies know employees would notice and bristle at smaller paychecks. So, they find other not-so-visible ways to cut costs.

“When people talk about compensation, they focus on pay and wages, which are still growing more than 4% a year,” Terrazas said. “But that doesn’t capture the full extent of the total compensation package including benefits, which has grown much more slowly.”

There’s a lot of talk of avoiding recession, but risks to the economy remain and worry employers: ongoing regional conflict, commodity prices amid volatile weather patterns, and still-too-high inflationary pressures. “We are not quite out of the woods yet,” Terrazas said. ‘

And after spending so much money on wages and inflation the last few years, companies also only have so much left in their coffers to offer. During talks with the United Auto Workers, Ford executive Kumar Galhotra said the company had no more money to offer. “We’re open to moving some money around within the deal that might fit the union’s needs better,” but “we are at the limit,” he said. Ford and the UAW eventually agreed on a record contract, even if it fell short of union demands.

What benefits are getting trimmed?

Companies typically first cut hours worked (for non-salaried workers), equity and incentive-based compensation, company contributions to the cost burden of benefits like health insurance or 401(k) retirement plans, salaries for new employees and pay raises for current employees, experts said.

Companies also turn to benefits like:

• dental insurance

• tuition assistance, possibly amid “more public (government) forgiveness,” Terrazas said.

• commuter assistance, which can be more than just the monthly bus pass. “A company can spend an incredible amount of money on a fleet of vehicles, which represents a major personal benefit to their employees,” said Phillip Hulme, founder of Atlanta-based Stars & Stripes Financial Advisors. “Taking that away can make for a mini-financial crisis if the employee is not prepared.”

• gym memberships

• mobile phone discounts

• meals, snacks and coffee

What does this mean for workers?

Workers usually end up paying what the company no longer pays for if they want to keep certain benefits.

• For example, basic gym-only monthly memberships average $45. If you want to keep that perk, you’ll have to pay for it. The same goes for any mobile phone discount, tuition assistance or pared-back insurance contributions.

“Rising premiums or deductibles people have to pay on their insurance coverage – that can really hit a family’s pocket in a negative way,” Hulme said.

Other perks are just flat-out lost.

• If a company ends 401(k) matches, for example, that’s extra retirement money employees just lose. And it’s not just the match they lose, but the potential growth of that money over the years, experts said.

“The broader impact is that as employees have to cover more of the costs of their benefits, the less disposable income they have for things like restaurants and travel and other consumer goods we like to spend our money on,” Terrazas said.

What can employees do to mitigate the losses?

Take charge, said Ken Zendel, chief executive of BetterInvesting, a nonprofit financial education provider.

Set priorities, create a budget and stick to it, experts said.

“Financial knowledge is a benefit no one can take away from you,” he said. “The important thing is to be proactive.”

For example, “if you work for a company that has cut your benefits, such as removing a 401(k), or even if your benefits are still intact, the best thing you can do is take charge of your own financial future by opening an individual retirement account (IRA), preferably a Roth IRA, and then commit to saving in your IRA each month,” Zendel said.

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Are companies adding any benefits?

Yes, but primarily for families.

“During the tight jobs markets of 2021 and 2022, there was a widespread effort to make working more accessible for parents, or perhaps to attract millennials on the cusp of their prime family-formation years,” Terrazas said.

Some of the largest gainers were:

• Fertility assistance

• Mental health care

• Maternity & paternity leave

• Adoption assistance

Even so, Terrazas warned this “tide could ebb – or even turn – in 2024 as labor is more available, and companies scrutinize costs and identify the benefits that are most (and least) important to their employees.”

Will workers ever get back their benefits?

Keep your eyes on the labor market because “the generosity ebbs and flows with labor market,” Terrazas said.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.

This article originally appeared on USA TODAY: Companies are sneaking in benefit cuts to pay you higher wages.