Employee-Benefits Startups May Survive Downturn Despite Corporate Cost Cuts
As companies look to slash costs in a shaky economy, employee-benefits startups worry 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 worker morale.
A surge of employee-benefits startups emerges as companies look for creative ways to attract and retain talent in a competitive market. These startups offer a wide range of perks through a B2B2C model, providing everything from fertility services to gym memberships to workers via their employers. However, as the freewheeling corporate spending of 2021 comes to a halt, these emerging companies face the looming threat of cost-cutting measures.
Despite fears of an impending recession, experts suggest this economic downturn looks very different from the crisis of 2008. Brian Kropp, chief of HR research at Gartner, points out that an ongoing labor shortage keeps the hiring market incredibly tight. A recent Gartner survey reveals that 40% of companies still plan to increase hiring this year, while less than a third expect to reduce their workforce.
Because talent remains difficult to secure, Kropp advises companies to maintain their existing benefits rather than slash them to save money. He explains that removing a perk creates a disproportionately negative reaction among employees compared to the positive boost of adding one, since workers value the security of having the option to use a benefit even if they never do. Consequently, startups offering mission-driven benefits likely avoid the chopping block as employers prioritize morale over marginal savings.