Employers, employees need flexibility now more than ever – that includes Wages & Benefits
By Merrill Matthews, Ph.D.
AUSTIN, Texas (Texas Insider Report) — The coronavirus pandemic has forced a lot of employers to rethink their employee compensation packages, both in terms of wages and benefits.
Many companies with “essential workers” on the frontlines of the pandemic provided employees with bonuses and/or temporary wage increases to recognize and reward employees on the demands imposed by longer hours, anxious customers and strained supply chains.
Many retail and grocery store workers were among those rewarded for their efforts throughout the pandemic.
For example, Stop & Shop, Albertsons, Kroger, Amazon, Costco, Whole Foods and ShopRite, to name a few, provided temporary extra pay during the initial months of the pandemic while widespread lockdowns were in place.
But now, with most states in the midst of reopening plans, many Americans returning to work, and grocery and retails sales beginning to return to pre-COVID levels, companies have begun to wind down these programs as we slowly return to some sense of normalcy.
With the height of the pandemic hopefully behind us, companies are moving on to the next challenge: ensuring long-term financial solvency and identifying incentives to keep and retain workers.
One of the biggest challenges – and costs – for corporate America is health care and pensions.
What we all know is that health care costs have been rising and many fear costs will increase when a coronavirus vaccine and treatment becomes widely available. And, of course, employer-based health coverage has to cover the costs of their covered employees who contract COVID-19 – just like most health issues - even if it wasn’t job related.
How much should companies set aside for that risk? No one knows yet. But a critical step – now and long after the coronavirus pandemic subsides - starts with ensuring stable and secure benefits for employees and their dependents.
But not everyone is on board. We’re seeing this struggle play out right here in our home state of Texas between Kroger, the nation’s largest grocer, and the United Food & Commercial Workers (UFCW) Union Local 455 of Houston.
Kroger has proposed a significant reform to the healthcare plan offered to its employees: moving from a health and welfare trust fund plan to a company-administered plan. This may sound like a nothing burger, but in fact, strikes at the heart of affordable healthcare benefits that are reliable for families.
Case in point: in May 2019, the union’s South-Central Health and Welfare Trust Fund actually had to cut benefits for thousands of Houston Kroger employees and their families as a result of years of financial mismanagement. While this is never acceptable, the era of COVID-19 makes this more alarming than ever before.
In their offer, Kroger has made a commitment to provide stable and affordable benefits that are guaranteed through the life of the contract.
This comes in stark contrast to the South-Central Fund, which has cut benefits before, and could do so again. Further, the union’s proposal from a few weeks ago includes higher associate contribution rates, higher deductibles, and higher out-of-pocket maximums.
Consider a routine procedure, such as having a baby. When benefit cuts were in place earlier this year under the South-Central Fund plan, the estimated employee costs for an employee to give birth is an eye-popping $8,500. On the other hand, under Kroger’s proposed company-administered plan, the expense is cut nearly 60 percent, costing the employee only $3,000.
The comparison is night and day. The South-Central Fund, as well as the union’s ongoing effort to block the move to a company-administered plan, is anti-worker, anti-family and anti-prosperity.
Large employers have proven to be effective and efficient when it comes to providing and managing health coverage. Companies like Kroger have extensive resources at their disposal, and as a publicly-traded company, are required to be transparent about how and where money is spent. This system helps ensure employees receive the coverage they have been promised.
Think about it – would you rather have your family’s healthcare benefits backed by a Fortune 25 company, or a health and welfare trust fund with a lengthy history of mismanagement, zero transparency, and a lack of accountability?
Resisting change when times demand them – as UFCW Local 455 is doing – is unfortunate, but not surprising.
The conversion from a company-administered plan from the South-Central Fund will leave the Local 455 with less power and less money, but comes with significant benefits that its members (Kroger employees) may reap as a result.
Employers need flexibility now more than ever, and that includes wages and benefits. The last thing we need is large employers, many of whom are hiring thousands of additional employees, being pushed by unions to overpromise and underfund their wage and benefits packages.
Such recklessness puts millions of American jobs on the chopping block, and risks creating an even more serious, long-term economic downturn.
Merrill Matthews, Ph.D., is a resident scholar with the Institute for Policy Innovation. He is also a past president of the Health Economics Roundtable for the National Association for Business Economics, the largest trade association of business economists.