Companies face an ever-expanding range of workforce crises – from an extremely tight labor market to new norms and expectations in the workplace which are forcing HR teams to meet more stringent employee demands than ever before. As if these problems weren’t difficult enough, rampant inflation and rising interest rates are threatening to cause a severe economic slowdown (or perhaps even a recession) in the near future.
With their financial future looking increasingly uncertain, companies are going to be considering ways to stretch their budgets and put themselves in a position to navigate the next 24 months with as little economic disruption as possible. One way to do this is to focus on employee retention. Not only is turnover expensive (due to the cost of identifying, onboarding, and training candidates), but it’s also a sign that your employees aren’t engaged and satisfied at work. High employee turnover can lead to cultural problems, lost productivity, and many other costs that companies simply can’t afford right now.
These issues are why HR teams should take a serious look at restructuring their benefits packages. The one-size-fits-all approach that many companies take to benefits has proven to be incapable of meeting the needs of the modern workforce, leading to employee dissatisfaction, disengagement, and turnover. By developing customized benefits packages that meet employees’ actual priorities, companies can address these problems and avoid the significant costs associated with finding and hiring new people.
Why Employees Value Customized Benefits
The COVID pandemic has permanently changed how and where employees work. While the immediate switch to remote work at the beginning of the pandemic was jarring for many companies and employees, 62 percent of respondents to a recent PwC survey say they prefer a mix of in-person and remote work. These findings are consistent with a broader push for greater flexibility in the workplace – employees are no longer willing to accept company policies that treat them as interchangeable with one another.
Flexibility is particularly important when it comes to compensation and benefits. At a time when workforces have never been more diverse, companies are forcing employees to accept benefits packages that don’t meet their unique needs. Our recent report on the state of paid time off (PTO) found that just 40 percent of employees use all the leave they’ve earned, and there are stark discrepancies between how they do so. For example, nonwhite employees are 19 percent less likely to use all their leave in a given year compared to their white colleagues, while women are 43 percent less likely to do so than men.
These are a few of the reasons 90 percent of employees agree that flexible PTO – which would allow them to allocate their accrued time to other priorities, such as emergency funds, student loan payments, and retirement contributions – would make them more likely to stay with their current employers. As companies struggle to retain employees and the labor market continues to tighten, providing this sort of flexibility should be a core focus for HR teams.
How the Right Benefits Can Increase Employee Engagement and Trust
Companies have been facing an employee engagement crisis for years. According to Gallup, 80 percent of employees say they’re not engaged at work, resulting in an estimated loss of $8.1 trillion in global productivity every year. Crucial determinants of engagement include the perception that managers and colleagues care about employees as people, encourage their development, and value their opinions.
All the data indicates thatemployees want to be treated as individuals in the workplace. Individuality becomes more important as companies prioritize diversity and inclusion, an area where they continue to fall short. According to a Deloitte survey of over 3,000 employees across ten industries, 93 percent say their organizations articulate inclusion as a value while 78 percent say those organizations are living up to those values. Companies can improve this perception and increase engagement by offering customized benefits like flexible PTO – a benefit 83 percent of employees say they would embrace.
While some companies offer ambiguous benefits like unlimited PTO, it’s stressful for employees to take advantage of these benefits. Employees are forced to make judgment calls about how much time off they can actually take without incurring repercussions at work, such as judgment from their colleagues. Unlimited PTO may sound like a generous benefit, but it still leaves employees with few options and assumes that all employees want the same thing.
Adapting to a Changing Workforce and New Economic Realities
CFOs are looking at all available options to reduce costs and increase productivity, and it’s difficult to think of a better way to do so than a reassessment of their benefits packages. The implementation of flexible benefits is particularly useful right now because it allows companies to improve employee morale, reduce turnover, and provide much-needed support to employees with funds that have already been budgeted.
Companies are confronting some of the most significant economic headwinds in several years. The most recent Consumer Price Index report showed an 8.6 percent year-over-year rise in inflation, while the U.S. Bureau of Labor Statistics recorded 4.4 million people quitting their jobs in April – close to an all-time high. These statistics indicate that companies and employees are feeling intense financial pressure so much so that employees are more willing than they have been in years to abandon their employers and look for opportunities elsewhere.
It’s vital for HR teams to be proactive in addressing employee retention issues. If companies wait to provide benefits that employees are increasingly demanding – like flexible PTO – they will have to contend with surging personnel costs in an increasingly brutal economy and labor market. But if companies start offering these benefits, they’ll set themselves apart by demonstrating that they genuinely care about their employees’ well-being. The best way to adapt to a changing workforce is to treat employees how they want to be treated.
Rob Whalen, co-founder and CEO of PTO Exchange.
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