Will Employee-Benefit Startups Survive Cost Cuts?

Nothing has impacted companies today more than the Great Resignation. That said, the phenomenon has directly and indirectly affected benefits packages for employees in more ways than one.

These days, you can hardly browse business news and not be met with record numbers of attrition. Workers, in particular, are now less committed to their jobs than ever before. The pandemic has made them more aware of the benefits of working remotely. To their credit, it has been hard to stay committed to all that’s happening worldwide. But the Great Resignation has affected small businesses and startups the most. 

To counter this, many startups have been offering benefits packages for employees. This can look like the option to do hybrid work and paid care leaves. Whatever the case, this current model is being threatened as the market goes downhill. Today, corporate consumers aren’t as willing to spend money. 

So, will startup employee benefits take a toll this 2022? Here’s what the numbers say. 

How to combat attrition

It’s been a hard battle to keep people from quitting, especially in startup models, where the workload is tough, and projects are tight. In 2021, the business industry saw the rise of startups offering employee benefits packages. This was done mainly to incentivize employees to continue working for the company.

But mostly, the pandemic just shined a light on a long-time issue. The lack of care and health insurance benefits for employees has magnified. Examples of company benefits include free refreshments at the office, free meals at the cafeteria, stock options, and retirement plans. Some startups even offer fertility care and other medical benefits for employees. 

To curb costs, startups have favored the B2B2C model. They partner with other companies to provide a string of mental and physical breaks for their team. And for a while, this strategy has been keeping employees to stay at their companies. 

But, the threat of a recession looms. And startups may put benefits packages for employees on the chopping block first. 

Bad markets

The current market cooldown may present a new challenge to budding startups. According to Ramp, businesses are all pulling back their spending. From May to June this year, companies have already decreased their spending by 6%. And for small enterprises, the number is even higher at 14%.

Most of the cost-cutting concerns electronics, advertising, and software purchases. Small businesses are also cutting back on shipping costs. But startups have been particularly good at curbing spending. They have reduced spending on electronics, shipping, and general merchandise. In fact, big purchases have decreased totally across the board. 

For small businesses, the average transaction amount decreased 15% from last year. The number may even be lower for small startups. But to some experts, this won’t necessarily mean bad news for employees. 

Good news for employees and benefits packages

And this might be true. According to Brian Kopp, the chief HR researcher at Gartner, the markets are not likely to impact benefits. This goes even if there is a recession. Kopp furthers that this looming crisis won’t affect startups as much as the 2008 labor crisis. 

People are valuable to startups. Otherwise, founders would not have spent so much money making them stay. Plus, benefits packages for employees look like they are here to stay. Much more workers now are not willing to put themselves through work. 

Most likely, startups will just cut costs in another area. There have been higher expenses and a greater demand for lodging and restaurant across all businesses. These are possible points where companies can decrease spending. Apart from that, it does not seem like startups are willing to compromise an already burnt-out workforce.

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