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Why Cutting Healthcare Benefits for Employees Hurts Your Business

On January 1st, 2020, one of the largest companies in the world, Amazon, will eliminate health benefits for 1,900 part-time workers at the corporate giants acquired grocery chain, Whole Foods. And although the tech powerhouse noted that this would only affect around 2% of their workforce, the elimination of benefits at a time where so many Americans struggle to obtain healthcare coverage sets a dangerous precedent for employers across the country.

In their statement, the company claimed, “In order to better meet the needs of our business and create a more equitable and efficient scheduling model, we are moving to a single-tier part-time structure.”

Though you may be asking yourself, what happens when companies start cutting benefits for their employees? Or why should I even care about part-time employees losing their benefits?

It’s because Amazon and Whole Foods are perpetuating a dangerous trend that has already resulted in only 33% of low-wage workers receiving health benefits from their employer. And when they obtain coverage elsewhere, low-wage workers pay can pay an average of $7,000 towards premiums on family healthcare plans and face annual deductibles that are nearly double those who receive health benefits from their employer.

Though cutting benefits not only hurts the employees, the direct and indirect effects of removing employee healthcare benefits can shake up a business as large as Whole Foods. For smaller businesses following by their example, they can find themselves facing even more significant challenges.

But, what exactly happens when companies cut benefits? How are they affected?

Lower Company Morale

Having your company remove your benefits, regardless of status, flat out hurts. There’s no better way to explain it. Especially if those employees feel caught off guard and aren’t given adequate notice.

And when the employer who made promises of benefits previously, go back on their word and change up their offerings, employees lose morale.

Less Productivity

When employees lose morale, they stop wanting to show up to work, and when they do, their rate of production is sure to decrease. Each industry is effected differently with businesses seeing decreased productivity result in fewer sales, fewer products produced or projects taking longer to complete than previously.

Increased Turnover

As employees lose interest in their work at the company, they start looking for a job elsewhere,¬† and as they leave they increase company turnover. And with the average cost of replacing an employee being roughly one-third of that employee’s yearly salary, employee turnover can be a costly-addition of a revolving door.

Decreased Talent Recruitment 

And as a business loses employees their ability to attract and recruit talented employees becomes increasingly tricky as qualified candidate accept positions with other employers offering higher wages or benefits now unavailable at a company who cut benefits for employees. This inability to bring in talent hurts not only in the present but well into the company’s future.

A Fractured Bottomline

All off these factors, from lowered morale and productivity to the lack of employee recruitment and retention, hurt the company’s bottom line. For larger companies like Amazon, the hit from these factors can potentially be made up elsewhere through the entity’s other brands. But, for smaller companies that believe that can do the same, the consequences can be dire. Companies whose bottom lines are effected reduce their ability to expand, innovate, and create new products. And in some cases, lead to the ultimate demise of the business.

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