In tough economic times, how do you talk to employees honestly about the state of company benefits plans and finance?

More specifically, what is and isn’t appropriate to share? Here are four proven suggestions for breaking unpleasant news to employees.

1. Fill in the blanks before they do

If you’ve haven’t already done so, it’s worth your company’s while to schedule a state-of-benefits meeting to go over your plans with employees, says consultant Anita Campbell.

One of the biggest mistakes many employers make during lean times is to fail to explain the rationale for passing along additional benefits costs to workers or freeze salaries.

In the absence of information, employees will make up their own stories. The longer management stays silent, the more people believe things they hear in the rumor mill. In smaller organizations, employees are usually closer to what’s going on in the business.

That’s because there are fewer departments and layers of management. Even so, chances are that they don’t understand how the firm’s benefits and compensation expenses weigh into company finance.

Example: You know the additional few dollars a month employees pay toward their health premiums can help avert potential layoffs. But employees may not. Once people see the bigger picture, they can usually accept the need for benefits cuts or salary freezes.

2. Own up to uncertainty

What happens when you talk about a serious issue with family or friends?
They ask questions. You try to answer them, but you probably don’t have answers for every question.

The same thing goes for talking to employees about their benefits and compensation. You can’t possibly know what will happen in the next plan year. It’s OK to admit it.

It’s also important not to make promises you may not be able to keep, such as “The freeze in 401(k) matches will only be for this year.” Simply letting employees talk and ask questions helps them feel better.

In many cases ,you can shoot down false rumors (“We heard the next step the company is taking is to cut health coverage for our kids”). Just as importantly, hearing your employees’ questions lets you know which issues are important to them.

That goes a long way in helping upper management set budgeting priorities as the situation improves.

3. Show confidence

No company wants to make it  seem to employees like the sky is falling, which is why many firms  avoid telling employees bad news.

But there are proven ways to convey the information and admit you don’t have all the answers, yet still reassure folks the problems are being dealt with.

The best way to deal with your own emotions is to know what you plan to say in advance.  Your behavior in the meeting will go a long way toward how employees will feel when they leave.

4. Invite suggestions

Ultimately, you may want to invite employees to become part of
the solution to your company’s situation during tough times.

Example: Offer an incentive for suggesting useful ideas for cost savings or increased productivity.

A non-profit organization in Tennessee recently started a PTO-sharing program at the suggestion of employees concerned about cutbacks in leave benefits. The result has been a jump in morale and closer ties between management and employees.