Study: Increasing Health Costs Likely to Cause Layoffs, Decreased Benefits

October 7, 2004 ( - Not surprisingly, human resource practitioners believe they will have to cut certain benefits, employees, and salaries to accommodate rising health care costs.

In a survey by the Society for Human Resource Management (SHRM) of a random sample of 375 of its members, it was found that it is quite a commonly held belief that organizations will have to cut some services in order to make up for rising health-care costs. More specifically, aggregate numbers showed that:

  • 29% reported a likely decrease in other employee benefits
  • 28% reported a likely decrease in hiring new staff
  • 22% reported a likely decrease in salaries/raises
  • 19% reported a likely decrease in training
  • 12% reported a likely decrease in technology investments.

The survey, which asked respondents the likelihood of adjustments in business practices, also reported a likely increase in the expectations of employee production (44%), in costs of consumer services and products (29%), in outsourcing (19%), and in downsizing and layoffs (15%).

class=”normal1″> “For years, health-care costs have increased three to five times faster than the rate of inflation, and employers absorbed most of that cost,” said Susan Meisinger, President and CEO of SHRM, in a press release. “Employers want to provide health-care coverage to employees, however, increasing health-care costs are cutting into all areas of business, and that severely affects an organization’s overall success and competitiveness.”