We still see the most robust labor market in recorded history despite record inflation and recession fears. Despite news of layoffs at FAANG companies and in the broader tech sector, candidates still have more choices and power in the labor market than ever. Even with historic wage growth of over 5% YoY, wages still significantly lag inflation leading to net wage growth of below -3%. Technology improvements and the continued failure of businesses to demonstrate caring and support for their people are still significant drivers of the current Great Resignation, which is rapidly becoming “Quiet Quitting” and “Job Ghosting.”
Total Rewards is a combination of both compensation and benefits. The term benefit is not intended to be applied exclusively to medical, dental, and vision benefits. Any benefits – vacation, sick pay, parental leave, tuition reimbursement, continuing education, Flexible Spending Accounts for Child Care, and more all fall into this broad category. When we open our minds and eyes to the breadth of options in the benefits category of Total Rewards, it is easy to see an entire untapped arsenal of options available to retain top talent.
That is not to say that compensation is not important. Still, many companies have relied too heavily on direct compensation as a retention tool and too little on other forms of compensation. Let’s look at some amazing ways Total Rewards can be leveraged to drive up retention and reduce unwanted attrition or turnover.
In the years 2000 through 2019, the average annual wage increase in the US was 2.92% (Average Wage Index (AWI) (ssa.gov)), and the average inflation rate was 2.10% ($160,000,000 in 2000 ? 2019 | Inflation Calculator (officialdata.org)). Hence, overall average wage growth was close to where inflation existed, justifying in the eyes of employers the 2-3% annual wage increases most employees who performed well in their jobs were used to seeing – but not anymore.
There are many levers that compensation specialists have at their disposal beyond base compensation. Some of these have a minimal impact on the bottom line, and it is very eye-opening to see just how little it could take to obtain and retain top talent.
A new and very hot back-to-office perk is a Pet Stipend. This monthly sum can be used on dog walking, pet sitting, or some other form of daycare for pets. Many of us have pets and love them like any family member. After working from home with these pets for so long, it is important to make sure they are cared for.
The four-day workweek is another trend. While not appropriate for every role, judicious use of this schedule for office-based roles, leadership, or any role not mission-critical for onsite during typical operating hours can lead to impressive results. A Maru Public Opinion Poll conducted for The Business Journal in February 2022 revealed the following:
- 82% of workers would trade 8-hour days to 4 ten-hour days for the same pay.
- 88% of earners at $100,000+ per year wanted this.
- 76% of those making less than $25,000 per year also wanted this.
- The Midwest was 84% higher than all other regions in the country in their desire for the 4-day work week.
- 74% said they would leave their current jobs for a 4-day work week.
- 97% said they would be more productive.
Other key compensation drivers of retention are too often overlooked by businesses, including free lunch (after all, who wouldn’t want a free lunch?), variable pay, performance management, and merit pay.
Employees respond well to variable pay. This helps them connect the importance of what they do to the company’s results. It provides them with greater control over their earning potential. Through variable pay, employees can see what the company values most and put their best efforts into those activities that are most impactful to the company and their own financial goals. According to World at Work, a global association for human resources management professionals and business leaders focused on attracting, motivating, and retaining employees, “60% of companies are using performance sharing – up 19% from 2 years ago – and individual metric use dropped.” Despite this drop in individual metric use, “68% of HR leaders report an increased number of eligible employees to receive a cash bonus in 2021.”
Performance management is another element. Reviews, whether frequent one-on-one meetings with employees or less frequent semi-annual or annual reviews, often provide data used by leadership when awarding raises, promotions, or other financial rewards. Recent trends reflect that 16% of organizations are now using a rating-less performance review system.
When determining merit pay increases annually, 12% of companies base such increases on something other than individual performance. There are many good things that employees do for the company beyond the key performance indicators for their role. Using criteria other than individual performance measurements helps employees feel more valued by the company and less like they are just numbers on a page.
When most employers think of benefits, they think of medical, dental, and vision insurance. There are many more benefits that can be offered than just these. Some are related, such as Flexible Spending Accounts used to pay for medical expenses or supplemental benefits intended to provide additional support when hospitalized or even to supplement income, such as short or long-term disability insurance. And while the costs for medical, dental, and vision insurance are constantly increasing, other benefits beyond these can be offered and aid in retention.
Starting with the medical, dental, and vision benefits – if you offer them, it is highly recommended that you gain feedback regularly from your employee population about how they are using their benefits and the value they see in them. Listen to what they are using and are not, what they wish would be in the benefits, and what they don’t want. This can guide you in the early discussions annually with your benefits brokers to adjust the benefit offerings to meet the needs of your employees. You may find some hidden nuggets that will allow you to reduce your costs or at least reduce the rate of increase in costs.
Beyond the medical, benefit trends reflect that employees want parental leave, student debt help, tuition assistance, retirement plans, and time off to volunteer. Each is an amazing tool that encourages retention.
Parental Leave, a benefit not just for the mother of a newborn or for childbirth, is extremely popular to the point where many counties and even states are enacting laws requiring such benefits. Companies that offer this ahead of any legal obligation demonstrate a strong desire to care for their people, which is very attractive to employees.
Despite the recent federal plan to forgive specific amounts of student debt, a lot of student debt will remain. Not only are many employees not eligible, but not all debt for eligible employees will be forgiven, and more students in college will come out with debt over time. Thus, student debt help and tuition assistance programs are excellent tools to attract and retain your organization’s early career and new graduate talent. They can be leveraged to improve the knowledge, skills, and abilities of your existing workforce by using these to supplement continuing education for professional certifications or even for the pursuit of graduate degrees for key leadership. The terms are often connected to longevity with the company, thus a robust retention tool.
Retirement plans are offered by so many businesses today that some job seekers consider them an entitlement. There are many different programs, from Simple IRAs to complete 401k programs and even pensions, for employers to choose from. Not offering some form of retirement program can make recruitment and retention a real challenge, and small business leaders are concerned about costs. The costs and compliance and reporting burdens are often not as arduous as many believe, especially when the administration is outsourced. As a retention component, review your vesting schedule with defined contribution programs. Tiered vesting of employer contributions can be a powerful way to retain talent.
Millennials and Gen Z have demonstrated a strong level of altruism. The ability to take time off to give back to worthy causes, volunteer for non-profits, and help clean up their communities and the environment are robust attracters to these employees. Companies that offer paid time off for volunteering can connect the earned time off to longevity with the company. Employers often tout this benefit and their employees’ impact on the community and environment to aid with talent acquisition, retention, employee satisfaction, employee engagement, and even business development. Clients and vendors often form a business relationship in part because of the ethical focus of a company, and this benefit is a straightforward way to demonstrate a company’s ethical foundation.
The Total Rewards Approach
We are still amidst a historic labor market, tighter than any on record. Stemming the tide of resignations and quiet quitting is critical. When businesses focus on employee retention, they gain the ability to grow their business, not just their crops. When resignations happen, they have a chance to transfer knowledge between employees and even generationally, maintaining critical capabilities to achieve strategic plans. While no single silver bullet solution exists to drive retention, the Total Rewards approach is a crucial and essential lever for talent retention.
CONTRIBUTOR: Michael Maggiotto, Jr. PHR, SHRM-SCP, Head of Advisory at BEST Human Capital & Advisory Group
The Answer for Today and Tomorrow
In this unprecedented business environment, it may also be time to shift your thinking on recruiting and make an investment to bring on an experienced hiring partner. One that can help you acquire the right IT talent and put your company in a position to grow. We can help.
New Iron Solutions realizes that it is more important than ever not just to fill an IT position, but fill it with a candidate that will take your company to the next level. It may be time to bring on an experienced partner to help you navigate this new age as the cost of IT employee turnover and missed opportunities are just too high to ignore. We help drive the achievement of our client company’s strategic goals by identifying middle management to C-Level leadership professionals. They align with the culture, behaviors, and results valued by your organization.