Financially pinched companies snip employee benefits

ByABC News
April 6, 2009, 11:21 PM

— -- Goodyear Tire & Rubber this year did something few companies have in this economy: It reinstated its suspended 401(k) match for employees.

Great news, right? Sure.

But the back story isn't very uplifting.

After the dot-com bubble burst and the subsequent recession of 2001, the tiremaker halted its 401(k) contributions in 2003 as part of a cost-savings program.

Six years and millions of dollars in lost matching money later, salaried employees now get a 50% company match for the first 4% of their pay. While Goodyear reinstated that benefit, it froze others such as its more traditional pension plan to save hundreds of millions of dollars.

As the tiremaker is among a few that have given something back, it is at the same time part of a growing and large movement of companies cutting or reducing benefits for employees.

Health care costs for employees have been rising for years, but perks and benefits such as cost-of-living increases, pension plans, bonuses, 401(k) contributions and tuition reimbursement are now being looked at as places to save millions of dollars. Given the massive savings for employers, many workers have doubts about when or if such items will ever fully or partially return.

On average, companies have sliced up to five employee-oriented spending areas, such as 401(k) matches and tuition reimbursement in the past year says Laura Sejen, global head of strategic rewards consulting at employment consultancy Watson Wyatt.

Job cuts and reduced raises have been commonplace for years, but the desperate economic times have chief executives cutting areas previously considered untouchable.

She and other experts say they cannot predict when or if such benefits will return: "Do you have a crystal ball?"

What it will take

Sejen does offer a laundry list of things that have to happen before workplace normalcy can return: The recession has to end, ailing companies have to see profitability for at least a few months, and company leaders have to feel confident that the rebound is sustainable.