Businesses bend for benefits


Despite the slumping economy, many local employers have managed to hang onto benefits packages, though hard times have forced a sizable number of businesses to change the perks they offer their workers, a December survey conducted by the Las Vegas Review-Journal shows.

More than half of business executives and managers responding to the survey said they left their benefits packages untouched in 2008, with another 41.5 percent saying they altered benefits, mostly through higher deductibles and copays on health insurance, but also by slashing 401(k) contributions. A small number -- 7.7 percent -- managed to lard up compensation packages.

One respondent who's had to pare perks is Clay Duncan, president of Las Vegas-based Southern Fidelity Mortgage.

Duncan said his lending business is off 60 percent compared with 2005 levels, but business coming through the doors today takes more manpower to close thanks to newly strict underwriting guidelines and the paperwork those standards require. That means Duncan still needs all hands available to write up fresh loans, so laying off workers to cover Southern Fidelity's decline in business isn't an option. Besides, good people are tough to find, even in today's market. Duncan said he wants to avoid the "revolving door" of colleagues that can damage employee morale.

So Duncan's only options -- after going without pay himself for 18 months -- were to impose the company's first-ever threshold for earning bonuses, and to move from paying 100 percent of his staffers' health insurance to covering 75 percent of policy costs.

"I held off a really long time. I've really tried to avoid having my staff feel too much of the pressure of where we are economically today," Duncan said. "I like to pay my people well. It's been really tough, but toward the end of (2008), our monthly volume was so low that I was forced to make decisions."

Duncan said his staff responded to the benefit modifications with "overwhelming support," because the company managed to avert layoffs.

Duncan didn't eliminate health coverage or bonuses altogether because his employees need those benefits, he said. Plus, the perks will help Southern Fidelity compete for workers -- a growing need given the recent surge in homeowners seeking to refinance into lower-interest loans.

For now, Duncan is done tweaking benefits. Given today's lower interest rates and big gains in home sales, he said he expects 2009 to turn in a better performance than 2008 showed.

Mary Beth Hartleb, owner of Prism Human Resource Consulting Services in Las Vegas, said she sees more benefit cuts among companies in all sectors. Businesses, including high-profile companies such as Boyd Gaming Corp. and Station Casinos, have cut or suspended matching retirement-plan contributions. Many more operations have shifted health care costs onto employees with higher deductibles and bigger premiums.

It's a smart strategy to preserve what benefits you can, Hartleb said. After all, the economy will turn around eventually, and employees will have their pick of jobs. They'll gravitate toward businesses that treated workers well through the downturn.

"Employers who are going to survive this have a really keen understanding of how important it is to keep those benefits in place, even if they have to make temporary plan-design changes," she said. "We are going to come out of this, and in the end, it will be an employees' market. When you think longer-term, the way you treat employees today has a direct reflection on how a company will do tomorrow."

Hartleb suggested smaller alterations to benefits packages. Hanging onto health insurance is essential, because it's the benefit workers seek the most, and keeping a 401(k) plan is also key for the tax advantages it confers on both company and worker, she said. So instead of dropping the company's health plan altogether, split more costs with workers. Rather than shedding 401(k) contributions completely, make them discretionary, based on whether the company or employees meet certain goals. Or even try negotiating with plan administrators to see if they'll reduce account-management fees.

"If it's the difference between having to close the doors on the business versus keeping the benefits, if it's that drastic, then you need to look at it. But (dropping benefits) can have a devastating effect on morale. Employees will start looking for other jobs if benefits are cut so deep that they can't support their families," Hartleb said.

For many small businesses, it is a matter of keeping the doors open, said Joseph Klinge, sole proprietor of the Sunset Group, a local real estate services firm that sells investment properties and high-end homes.

Klinge's monthly insurance premium jumped 80 percent in 2008 even as his deductible doubled. He's considered dropping coverage altogether, but worries about the "catastrophic" financial hit he'd take should he fall ill while uninsured. It's a calculus he said many small businesses increasingly must make.

"Margins are being compressed dramatically for small businesses," Klinge said. "Revenue has come down dramatically, and expenses have gone up dramatically. Small businesses aren't making as much money as they were. It's forcing the small businessperson out of business, or forcing them to find other jobs to supplement their primary job. They're making decisions around their business that are no longer proactive, but rather more protective."

For Nevada Association Services, a collection agency that focuses on delinquent homeowners' association fees, the soft economy means business has been solid, so benefits haven't changed, said David Stone, the company's president. The company offers a 401(k) plan and profit-sharing, and it pays for 100 percent of employees' health insurance.

Even when business dips in good economic times, though, Stone has resisted slashing perks. He's weighed altering health coverage, because insurance costs seem to jump "exponentially" every year. But he said he'd rather take a salary cut for himself than slice into insurance coverage for his more than 50 workers.

"My employees take care of me and my company, and I in turn want to try to take care of them and their families as best as I can," he said.

A similar philosophy induced one local survey respondent to add benefits in 2008.

Polar Shades Sun Control, a Henderson company that makes and assembles retractable awnings and screen doors, just added perks: health insurance that the company splits 50-50 with its 18 workers, and life insurance that the company fully funds. They're the first insurance policies the company's been able to offer, though Polar Shades already provided a 401(k) plan for staff members.

"We have a great set of employees who are very dedicated to the success of the company," said Steve Mevius, Polar Shades' owner and president. "They're all hard-working, they all care about the company, and we felt that, for their loyalty, that we had to give them something in return."

Mevius said the insurance coverage has paid dividends in employee morale. Providing health and life benefits sends a good message about the company's direction, and secure, satisfied workers mean sustained or improved productivity.

Mevius said he'll be able to pay for the added benefits through increased sales. He's aggressively pursued new Polar Shades dealers nationwide, and the company added a client who plans to purchase more than $1 million in window coverings in 2009. Polar Shades also added warehouse space for an anticipated distribution push into West Coast markets. Mevius said he expects polar shades' sales to grow 50 percent to 60 percent in 2009 when compared with 2008 revenue.

"The biggest thing for us is the quality control of our product, and we want our employees to feel good about the company and our product," Mevius said. "We look at this time as an opportunity to grow. Companies that aren't as strong will go away, and that will allow us to capture more market share."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.

 

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