Why do some companies not give minor benefits to employees?

Question

I'm not talking about benefits that imply more money for the employee.

Few years back, I worked in a company (let's name it company A) where we had many small benefits (free of course):

• Having fresh fruits every day
• Unlimited Soda
• Free breakfast (Though not fancy, it is really appreciated some mornings)
• Team events at least once every 3 months
• And many others (sport, foosball table...)

I really appreciated it. Although I know this doesn't make everything and if someone wants to leave he can and will.

I was reading this article and this sentence stayed in my mind:

Let’s not ignore the elephant in the room: employees will quit. No matter what you say, no matter what cushiony benefits you give, no matter how hard you try, they will leave you. It’s just a matter of “when”.

I asked a high level manager in company A about why they gave those benefits. His answer was that it takes time to train someone and once someone is trained, keeping him even one more month is worth the money. And of course the fact that if you are happy, you tend to be more productive.

Now I am in a different company (company B), and they are pretty much the opposite. For instance, they will even forbid you to use the office milk (for tea/coffee) for your cereals... This seems silly when you know that to be efficient in company B, you need a minimum of one year (as the products are very complex etc...).

And when I think about company A, I'm sure all the small benefits were not that expensive.

So my question: Am I missing something? Or is it just bad management?

I always thought it was in the interest of the company to pay this small fee in order to keep the trained employees longer.

PS: The company isn't in a financial struggle, quite the opposite actually.

PS2: Both companies are roughly the same size, about 60 employees.

Answer 1

So my question: Am I missing something? Or is it just bad management?

Yes, you are missing something. No, it's not bad management. You are missing the concept of "company culture".

Every company either deliberately or unintentionally develops a corporate culture. That culture influences the overall way the company operates, how it treats its customers, and how it treats its employees.

Some companies believe that it's very important to give their employees a bunch of small perks - games, activities, free food, free snacks, etc - as a way of making things fun, and hopefully generating loyalty, retaining staff, getting more work hours out of salaried employees, etc. Other companies believe that it's more important to spend their money on salaries, rather than spread it across a bunch of smaller perks. Again, they are hoping to generate loyalty, retain staff, be more productive, etc.

Some companies offer food in order to encourage employees to come in early and/or leave later. Other companies provide a robust network that allow employees to work effectively from home.

Some companies spend money on training as a way to grow their employees' talents and retain them. Other companies tend to hire more senior staff who need less training.

Some companies have a culture of watching every penny carefully. Other companies spend more freely.

Some companies drive their employees very hard, in order to maximize the quarterly profits. Other companies are more laid-back and focus on the longer term.

Some companies grow and contract rapidly, in response to market demand. Other companies are very slow to fire and equally slow to hire.

I interviewed at one company whose stated policy was to overpay their top-performing 5%, so that they cannot afford to leave. They also distinctly underpaid their bottom 5% in hopes that they would seek work elsewhere.

I worked at one company that served dinner to everyone who worked through dinner time. Unfortunately, they found that many folks just stayed for the dinner and left immediately afterwards, and thus weren't actually being as productive as hoped - so they ended the practice.

I worked at another company that provided tons of similar perks - free soda, lots of games like pool, ping-pong, and Foosball, free popcorn - it was very much a dorm-inspired culture. It was fun and they attracted many young workers willing to work fairly long hours - until the company went public and started to tank. Then repeated rounds of layoffs caused "retention" not to be an issue for the company any more.

Etc, etc.

There are many ways to put together a company, to nurture it and to grow it.

There are no right or wrong answers here. None of these are "bad management" in and of themselves, only "different approaches".

Answer 2

Timely enough, I ran into the article "Happy Workers, Richer Companies?" (which boils down to a paper, "The Link Between Job Satisfaction and Firm Value, With Implications for Corporate Social Responsibility" by Alex Edmans) today, which points out a correlation between worker happiness and a company's stock price relative to its peers. There's a caveat, that the benefit only applies in labor markets that allow employees to move freely.

I wouldn't say it's always bad management, and per the article, it's not always a profitable idea. But in many cases it seems as though your company is being inefficient in spending money to attract and motivate its employees.

Answer 3

Specific answers that companies would come up with:

• Providing the list of things you give is probably more expensive and more hassle than you'd think. A small fraction of the salary budget, to be sure, but don't forget to include the time used to decide what to get, put it in place, clear it away, deal with issues. You could contract all that out, of course, but external full service catering isn't cheap either. Employees like that stuff, but it doesn't automatically mean it's worth the cost and hassle. I'm not going to work for a company I otherwise don't like just because they give me apples, and I'm not going to quit a company I otherwise like just because they don't. If the reason for doing it is employee retention, they have to guess how much difference it makes to the marginal cases, and compare that to how much it costs to satisfy everyone.

• Deadweight loss. Once you work out what it costs, think about whether your employees would pay that much for breakfast if it was out of their own pocket. Now think about whether (even after differences in tax for different kinds of benefit) the money is better used buying them breakfast, or adding to their salaries. That said, employers commonly act in ways that appear irrational as regards non-cash benefits, so this is by no means a clinching argument.

• You have to stop somewhere. It's not the employer's job to provide just anything an employee asks for. What's special about breakfast, why not provide three meals a day? What's special about three months, why not run team events every week? What's special about foosball, why not stock a proper arcade, snooker room, gym? Why give your employees any reason to ever leave the office? ;-)

• Tax. Depending on jurisdiction, there may be a limit to how much free stuff you can load onto your employees before they have to declare it and pay income tax on it.

they will even forbid you to use the office milk (for tea/coffee) for your cereals... This seems silly

It might well be silly. The company should aim to seem somewhat friendly to its employees. The company has chosen to look unfriendly here, by saying "use as much milk as you like" with the qualification "but only for this purpose". You have to question whether that's wise.

Who knows, perhaps they aren't unfriendly but they've had problems with cereal-eaters creating very irregular demand for milk, and occasionally using it all. Tea/coffee is probably considered higher priority. Maybe they should just buy loads of milk (to satisfy max demand) and throw a lot away, but looking wasteful is also bad even if it's the rational choice.

I think most companies would conclude that making several people buy and store their own separate milk is nonsense, and as such the company has to just let people use the free milk for whatever they like, and do what it takes to cope with that (backup UHT, except that many people consider UHT worse than nothing).

[Edit: I have a sneaky suspicion that in the UK, milk for tea/coffee is non-taxable in any amount, whereas giving employees milk for cereal is a taxable benefit, so strictly speaking it needs to be accounted and taxed at the employee's marginal rate. If the employer elects to pay the tax too then if the employee's marginal rate is 40% then that's a 67% additional cost to the employer on top of the value of the benefit. Food is only non-taxable if it's a meal in a "staff canteen". Therefore, instructing employees not to use milk for cereal (or any other arbitrary-seeming rule) might be purely an accounting thing, to save the overhead of tallying it all and issuing P11Ds. Which you can't actually do accurately anyway, since you don't know what employees took what from the milk/fruit/whatever buffet. Even if it's arguably so small a benefit as to be negligible, the company has to stop somewhere or HMRC will eventually object.]

Answer 4

I may not understand every element of my compensation package,but I do understand "free food"and "casual dress code". I like an informal workplace where I get plenty of latitude on how to do my job, as long as I am not crossing wires with someone else and my work goes in the general direction of the team's. Free food and casual dress codes are easy to understand. Compensation packages are not.

You're right. These benefits are not expensive. My first company used to offer (and still does) free group dinner for everyone who had to work late -It was a pretty good calculation, because having every eat at the place is a much better use of time than have everybody scatter all over the neighborhood looking for food, especially because we usually faced tough deadlines. There was actually a method to the madness.

I wouldn't want to work for company B, unless company B offers me an opportunity to develop new skills and new strengths that will have a strong, positive impact on my career, and this opportunity is not available at company A.

Companies tweak their benefits all the time, and how they tweak the benefits has an impact on the kind of workforce they get. And these companies may design their benefits for that very reason: to get the kind of workforce that they want. To tweak something to get what you want is not bad management.

It's a given that employees will leave, either for career development reasons or for personal reasons. The question for companies is how to take advantage of it. When employees leave, the company may get new business connections and possibly new business partners down the road. When employees come in, there is an influx of new ideas, new attitudes, new approaches on how to get things done.

Answer 5

I think you have to ask yourself and maybe some other employees, "Why did you take this job?" Everything is relative, so it could be this is the best job you could get at this time.

Some of the perks you mentioned are more of a convenience than just the money. Otherwise, everyone has to stock the frig with their own fruits and sodas or take the time to walk/drive to where they can be purchased during office hours. Some people may not really care about it, so they figure, "Just pay me the money and I'll spend it however I want." If you've never had these things, you don't miss them.

Not all companies have an employee that wants to take care of this type of stuff. Usually this stuff falls under the duties of the receptionist. Company B may not have one or they prefer not to require this person to be away from the phones stocking fruit and soda.

Could be all sorts of reasons. The answer to your question is, you'll just have to ask. Personally, I'd rather work with polite professionals than someone one a power-trip who thinks they own me because they gave me a free apple. In my mind, I earned that apple anyway.

Answer 6

I am quite sure that my company has done the numbers and figured out that benefits are very cost effective. Importantly, when you hire employees, they will look at the complete package, not just salary. I get benefits that have substantial value for me and little cost for the company. On the other hand, I wouldn't leave for a job without these benefits unless another job paid substantially more.

The cost of benefits is tax deductible for the company. If I had to pay myself, I'd have to pay out of money that I paid tax for. I need something to eat at lunchtime. At my company I walk to the canteen, get a good, healthy, and cheap lunch, then walk back to my desk. In between I talk to colleagues which has some amount of benefit to the company. Minimal loss of time. If I had to find my own lunch, I'd be gone for ages, it would cost me a lot of money, cause stress. People don't work for x hours, they spend x hours between arriving and leaving. Having lunch quickly means people will work longer or be easier convinced to work longer.

I can order things on the internet and have them delivered to the company. Can you imagine how much is wasted in holidays by people waiting for deliveries? Not where I work. No holidays wasted. Which means people working are more refreshed because they spend their holiday on a beach with their family and not waiting for a delivery man.

But to answer the question: For some companies, the value of an employee's well-being is rated at exactly zero. The points that I gave above are beyond the understanding of some people.

Answer 7

Look, for a small company that's easy such perks:

• Having fresh fruits every day
• Unlimited Soda
• Free breakfast (Though not fancy, it is really appreciated some mornings)
• Team events at least once every 3 months
• And many others (sport, foosball table...)

But imagine having to pay the same benefits for thousands of employees, it's not the same you should have a budget for millions only for those. Its not feasible for large companies.