Asked and Answered

By John W. Olmstead, MBA, Ph.D, CMC 

Q.  As the administrator of our 14 attorney firm I have been asked to present a plan to the partners for reducing employee benefits. We have had a difficult time during this recession. So far we have not had to reduce our employee headcount - but this could change in the future. It is our hope that if we can reduce the cost of benefits we won't have to layoff or terminate any employees. What is the best way to handle/manage this difficult discussion and process?

A.  As an "at-will" employer you have the right to change benefits whenever you please. However, you must be careful as employees will perceive a reduction in benefits as a reduction to their overall compensation package.

If you do decide to cut benefits it is advisable to plan carefully and communicate as much in advance of the changes so that people know what is coming in time for them to allow for changes in their lives. It is also a good idea to be prepared to clearly and concisely share comprehendible reasons for making these changes. If implementing this type of change will save jobs, present it this way. If you believe that you may again provide benefits that have been cut once the economic environment is better, that knowledge will make it more palatable to employees.

A key point here -- do an overall examination of your benefits and cut once and be done with it -- don't keep reducing benefits every month or so.

You might want to examine your overall benefit costs - especially medical insurance - and strategically think about best approaches. It might make sense to cut here rather than a day of sick time or vacation.

Food for thought - According to a Society for Human Resource Management Poll taken in March of 2011 in the last six months 20% of employers reported that they had reduced benefits - the highest level since the fall of 2008. "Employees continue to scale back on health care coverage for employees (91%) and dependents (89%), and the amount of leave that an employee can accrue (54%).

So proceed with caution – be sensitive - but go for it if it makes sense for your firm.

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John W. Olmstead, MBA, Ph.D, CMC, (www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.