Pay cut for permanent employee because of benefits?

Question

My husband is a temp employee at a well known company. They are saying they want to hire him as a permanent employee and that he will recieve full benefits. As a result of him getting full benefits they want to reduce his hourly pay when they do hire him on (by a dollar or more). Has anyone ever heard of this before? I've never run into this situation before. Is this normal?

Answer 1

This is not uncommon. In fact, much of the time if you work out the value of the benefits the full timers actually come out ahead in spite of the slightly reduced pay. Keep in mind that temporary labor is paid more because the company doesn't have to provide for unemployment insurance, retirement plans, group medical plans, etc... However, temps are the first to go during the lean times.

Insurance is expensive!! Don't discount the value of group medical benefits in making your decision. However, keep in mind that the cost and coverage vary greatly from company to company. In most cases you get good coverage for much less than you would pay as an individual. OTOH, sometimes the coverage just plain sucks, so be careful here.

401K - Keep in mind that most companies match dollar for dollar up to a certain percentage of your pay. Not only is this a good way to save for retirement with pre-tax dollars, in effect it raises your salary without raising your tax bracket.

Answer 2

Where I am it is not at all unusual for the hourly pay to go down for people hired from "temp to perm", because, if you think about it, the company are paying for the whole benefits package (wages, their share of health benefits cost, employer 401(k) contribution/matching contribution, Social Security contribution, etc.,etc....

Unless hubby is being asked to take a cut from $2 an hour down to $1 an hour, he should probably jump at the opportunity!

Best wishes...

(BTW, congratulations to your husband on being extended the invitation...they must like him a lot. Temps are cheap compared with full-on regular employees!)

Answer 3

This is normal.

The cost to an employer is the employee's pay, plus the employer-paid taxes and the employer-paid benefits.

For example, the employer pays you $10 as a temp. They don't pay any benefits.

The benefits cost the employer $1 per hour.

Therefore, when they hire you fulltime, they pay you $9 as salary, and pay $1 in benefits for you.

That is how the employer adjust the cost of the benefits against your salary. Perfectly legal, and done all the time.

Answer 4

I would say that it is uncommon around here (Ga.). Usually, a company will hire from temp. to full time because the person would be an asset to the company. I would weigh the options and factor in the wage per hour including all benefits and ins. (if included), versus his hourly wage now and see which is better. Good luck.

Answer 5

I don't know exactly what you mean by "full benefits," but paid healthcare, life insurance, pension, education benefits, etc., can more than double the actual cost of an employee. Companies can afford to pay a higher hourly wage when they do not also pay for benefits.

Answer 6

I have heard of this previously. The company is trying to lower their employment costs. You need to ask yourself if the added benefits will offset the lower pay. If not, then perhaps he should continue with the temp agency. He might also be able to do some negotiating to get more money. They may also raise his pay once they understand his capabilities. There is only so much money to go around. Some people would prefer more benefits with less pay.

Answer 7

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Answer 8

I agree with Travis W and "man with...", it is indeed common practice, and makes perfect sense when you consider all factors.

Answer 9

No, new to me..