Cutting Employee Benefits to Cut Costs

A major ethical concern in the business world today is cutting costs by way of eliminating tenured employees. This is often done by one, or many, of various means that range from questionable to unscrupulous. Many companies opt to reduce benefit and/or pay increases, others create a changed and therefore now unacceptable work environment, and still others simply find a reason to fire 'expensive' tenured employees.

Anecdotal as it may be, I recall attending classes as a manager-in-training for an electronics company, and having this theory explained to me. On the white board, in large red letters, our district manager scrawled 'Ways to cut operating expenses.' Of course, as naive (and mostly ethical) trainees, we all responded with standard answers : decrease theft, schedule appropriately, increase training and efficiency, decrease displays with the potential to damage items and create zero-cost reports.

His reply was simple : we were wrong. The best way to decrease expenses, he explained, was to invent reasons to fire older, tenured employees. Their benefit cost, from a combination of their age, health and length of employment with the company, caused each store's particular profit and loss to take a negative turn. We were baffled; tenured employees had more experience and more skill, and, to us, seemed more productive. He explained that the potential productivity loss was very slight and did not warrant their cost to our business.

This lack of ethics and concern for employees is a large problem in today's corporate world. In 2005, the New York Times released information from a Wal-Mart memo detailing how to cut costs. It suggested such steps as creating an undesirable work environment by requiring all functions contain an element of physical activity; replacing higher paid, full time, older employees with lower paid, part time, younger employees; and reducing the value of benefits and raises.
While most companies, as with Wal-Mart, attempt to spin the changes to garner positive public reaction, the true motives are quite obvious. Requiring physical activity in every job function was not an attempt to create a healthy workplace, it was an attempt to create an undesirable workplace for those who were not capable of, and were never previously expected to exhibit, such physical activity. Replacing tenured employees was not an attempt at preventing them from 'pricing out' of the job market, but to lower the company's overhead and benefit payouts.

Other companies, such as Circuit City, have used similar tactics under the guise of 'wage-management'. High paid employees were given notice of their impending termination. Circuit City allowed them to the opportunity to be rehired at a lower wage.

What can be done about this? It is a bit uncertain, exactly, what companies can do to avoid these employee disasters. The simply solution is, of course, to tell them not to do it. However, all of these corporations are businesses first, with investors to keep happy and bills to pay. The solution to a corporation's financial woes is often not simple, and often very unprofitable - hopefully in just the short term. They often involve restructuring, removal of corporate levels employees, increasing prices or closing of potentially profitable locations. Many companies will simply bite the bullet, so to speak, and take these steps for their employee's sake. Yet most prefer to take the easy way, and, barring severe government intervention on the free market, the only probable solution is consumer outrage and refusal to frequent their business. Until that happens, and these businesses are unable to operate despite their 'cost cuts,' the unethical corporate behavior will continue.