Hiring and retaining talented employees is a fierce battle the 21st-century employer cannot escape. The modern employee is smarter, more demanding, easily dissatisfied and disloyal. As the economy grows and the industry becomes saturated, the need for exceptional talent increases, giving employees the power to bargain for the best compensation package. Fortune 500 companies like Google have resorted to offering free meals made by professional chefs, bi-weekly chair massages, yoga classes, and haircuts. Also, they offer generous tuition assistance, organize panels with high-profile celebrities and provide scholarship funds for their employee’s children. I mean, the war for talent is real!
Investing in employee benefits may seem wasteful. However, companies who do provide meaningful benefits to their employees understand the value these talented individuals bring to the enterprise.
Why should employers invest in benefits?
Great benefits make employees happy. Happy employees are productive and loyal.
According to a recent survey, a happy employee is 31 percent more productive than an unhappy employee and 87 percent less likely to leave an organization. So how does one make an employee happy? By making their work feel valued, listening to their inputs and improving their working conditions. One of the best ways to improve working conditions is by providing benefits. An employer who offer excellent benefits silently communicate to their employees that the organization cares about the employee’s financial, social, physical and professional wellbeing. If an employee feels that the employer cares about their success, they are more likely to perform better and remain at the organization longer. Furthermore, if an employer wants to win the war for talent, they must provide ‘coveted’ benefits. A talented employee is worth the expense.
A talented employee is eight times more productive than an average employee. According to the McKinsey Global Survey, high performers are 400 percent more productive than average ones. In highly complex occupations like software developers and medical engineers, top performers are an astounding 800 percent more productive. They innovate new solutions, boost companies’ profits and help employers stay ahead of the competition. They contribute significantly to the advancement and success of the organization. Companies who understand the value of these employees invest in them with bonuses, perks, and meaningful benefits.
It’s cheaper to retain an employee than to hire a new one.
According to the National Association of Colleges and Employers (NACE), it costs small business employers $7,645 to fill a new position. According to the Society of Human Resources Management (SHRM), it costs an employer –large or small, $4,129 to fill a new post. However, if an employer needs to fill an existing position, it costs the enterprise tens of thousands of dollars (NACE). To be precise, it costs 50 – 60 percent of the ex-employees salary to hire and train its replacement. New employees are typically a net drain on productivity. They draw a salary, incur training and orientation expenses, and consume co-workers’ time without providing much in return. It takes approximately 8-26 weeks for a new employee to achieve full productivity (MIT Sloan). In conclusion, it’s more cost effective for employers to invest resources in retaining talented employees than spending those resources to fill up vacant positions.
What are the right benefits to offer?
Two main reasons why employees resign are uncompetitive salaries and limited benefits programs that do not improve the individual’s finances and lifestyle. As a result, employers can use targeted incentives and benefits to improve employee loyalty and retention. A survey conducted by MetLife promises that 73 percent of employees will stay loyal to their employer longer if they customize their benefits based on their personal information.
But what should a business do if it can’t afford expensive benefits? It can offer numerous options that are relatively low-cost and highly valued by its employees.
The benefits most valued by employees
Flexible hours, more time off and work from home options
Flexible hours and work-from-home arrangements are affordable perks for companies that want to offer appealing benefits but can’t afford an expensive benefits package. Both of these benefits typically cost the employer nothing — and often save money by lowering overhead costs.
A survey conducted by Fractl found that, after health, dental and vision insurance, employees place the highest value on benefits such as flexible hours, more paid vacation time, and work-from-home options. Of course, the highest valued benefits (health, dental and vision) are expensive and can cost about $6,400 per employee and $18,000 per family on average. However, the cost of these benefits can be lowered significantly if a PEO, like XcelHR administers them.
The next most-valued benefits were ones that offer flexibility and improve work-life balance. A majority of respondents reported that flexible hours, more vacation time, more work-from-home options, and unlimited vacation time could help give a lower-paying job an edge over a high-paying job with fewer benefits. Furthermore, flexibility and work-life balance are of utmost importance to a large segment of the workforce: parents. According to a recent survey by FlexJobs, parents value flexible hours and work-life balance above salary and health insurance in a potential job.
Offering an unlimited time-off policy can be a win-win for employer and employee. Paid vacation time is a complicated expense since it’s not merely the cost of an employee’s salary for the days they are out; liability also plays into the cost. American workers are notoriously bad at using up their vacation time. Every year Americans leave $224 billion in unused vacation time on the table, which creates a massive liability for employers because they often have to pay out this remaining vacation time when employees leave the company. For example, HR consulting firm Mammoth considers its unlimited time-off policy a success not just for what it does but also for the message it sends about company culture: employees are individuals who can be trusted to responsibly manage their workload regardless of how many days they take off.
Therefore, switching to an unlimited time-off policy can solve the liability issue and wipe away the average vacation liability. This option can save companies $1,898 per employee. According to SHRM, there are only 1 – 2 percent of companies currently using an unlimited time-off policy. As a result, this benefit is an option that can easily make small businesses more attractive.
Student loan and tuition assistance
Student loan and tuition assistance are also highly coveted benefits. A recent survey shows that 50 percent of the respondents would take or remain in a lower-paying job if these benefits were offered. Fortunately, student loan assistance is a benefit that is not commonly provided in the job market. So employers could include this option in their benefits package to become more attractive. A benefits survey from SHRM found that only 3 percent of companies currently offer student loan assistance, and 52 percent of companies provide graduate educational aid. Although education assistance sounds costly, companies can take advantage of a tax break by providing this benefit. Employers can provide up to $5,250 per employee per year for tuition tax-free.
Company Ownership and Profit Sharing
A company stock ownership or profit sharing program can be a significant benefit to provide employees. If employees can experience the rewards of business profitability, this can be a powerful incentive for them to hustle at work. In a profit sharing program, an employee receives a percentage of the company's profits based on its quarterly or annual earnings. This profit is paid out directly to the employees in the form of cash. For company ownership programs, employers can offer an employee stock ownership plan (ESOP) where employees can buy stock in their company through payroll withholding. Alternatively, the corporation could also contribute shares of its stock to funds that allocate the shares to employees based on their annual compensation.
Retirement Savings Plans
With thousands of Baby Boomers leaving the workforce daily, the need for robust retirement savings plans is high on the list of priorities for many employees. This need is also real for those who are in their 30s and 40s, as they are busy earning as much money as possible to boost retirement plans. Companies can set up an automatic retirement savings plan and match 50 cents on every dollar that employees contribute to help increase retirement savings.
Training and Development
The learning and professional development markets have exploded since the evolution of online and remote classes. Besides, there are still many working adults who are reinventing themselves as a result of the recession which took away many jobs. Having a program that provides on-the-job training at no cost to employees can be a significant boost to employee engagement and productivity. Make sure that there are many ways for employees to learn both on and off the job, such as support for college tuition, industry certifications and community events.
Company celebration and events
Job benefits that don’t directly impact an individual’s lifestyle and finances are the least coveted in the industry. These include freebies such as coffee and snacks and company-sponsored gatherings like team-bonding activities and retreats. It doesn’t mean that employees don't value these perks, but they aren’t important enough on their own to convince an employee to remain loyal to an employer.
The war for talent is real. If small business employers want to succeed in this war, they have to become flexible and creative. They have to be more sensitive to the needs and requests of their employees. They have to provide strong incentives and customized benefits package to boost engagement and loyalty. They have to be shrewd, and unafraid to invest in their employees; knowing that their investments help the organization thrive! Fortunately, they do not even have to break the bank for that. Studies have shown that many employees value benefits that are low-cost to the employer, such as flexible hours, time-off, work-from-home, bonuses and profit sharing, or training and development. As a result, employers need to determine what their employees care about and tailor their benefits to meet those needs.