Employee-Benefits Startups May Survive Cost Cuts Amid Ongoing Labor Shortage
As companies look to cut costs in a slowing economy, employee-benefits startups fear their services will end up on the chopping block. However, experts note that a tight labor market forces employers to preserve these perks to avoid damaging employee morale.
A wave of employee-benefits startups faces uncertainty as corporate customers look to slash costs in a cooling economy. These companies, which sell everything from fertility services to gym memberships through a B2B2C model, experience a potential threat to their growth as the freewheeling spending of 2021 comes to an end.
Despite these fears, experts believe this downturn does not mirror the 2008 recession due to a persistent labor shortage. A Gartner survey reveals that 40% of companies still plan to increase hiring this year, indicating that the labor market remains incredibly tight and competitive.
Because hiring remains high, employers strongly hesitate to cut existing benefits, as removing a perk causes significant negative morale hits compared to the positive impact of adding one. Experts warn that companies, especially those with mission-driven cultures, risk severe backlash if they eliminate benefits that employees value as a safety net, even if they rarely use them.