Microsoft cuts benefits

Microsoft recently cut employee benefits and reactions from employees have been negative.

The Seattle Times quotes one person as saying, "Microsoft's benefits used to somewhat make up for what is a difficult place to work. Are we now going in the direction that it will be both difficult and unrewarding?" The article goes on to summarize the comments by saying, "The comments have one recurring theme: The cuts are leading to a drop in morale."

Cutting benefits can be dangerous. Typically, with any salary or benefit cut, your best employees (who have the best job prospects) leave at a disproportionate rate. It almost always has a negative impact on morale and productivity.

Moreover, benefits often are valued by employees at a level beyond the pure monetary value. One of the more interesting books I've read on employee compensation, Strategic Human Resources, makes this point:

Benefits and perks can also be particularly powerful symbols of gift exchange, moving the employment relationship from one with purely economic connotations to something more along the lines of a kin or friendship relationship. Salary, wages, and even bonus payments all have the connotation of an economic exchange in which each party should attempt to extract the best possible (narrowly selfish) deal. Some forms of benefits and perks are of an entirely different flavor and can cause the worker to respond with reciprocal gifts or by internalizing the welfare of the organization.

The psychological leverage associated with providing benefits is likely to depend on whether the employer is a pioneer in providing this perquisite or instead simply seen to be matching the competition.

It's interesting to note that Google offers a particularly exceptional benefits package.

Update: Well, look at that. Fourteen months later, BusinessWeek blames low morale and loss of key people, in part, on these benefit cuts.