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It’s Employee Benefits Versus Employee Turnover In Tomorrow’s Job Market

With millions out of work and hiring way down, many businesses have switched to emergency mode. Rather than get used to a “buyer’s market,” however, companies should remain alert to the long-term trends that will continue to shape hiring and retention as the economy normalizes.

In coming years, companies will see a tug-of-war between employee engagement initiatives and a vast, growing trend of rising turnover. One of their most important tools – perhaps the most important – will be robust employee benefits. Yet, many businesses are failing to prepare for the showdown.

Employees Are Learning That Keeping Their Options Open Can Be Good For Their Bottom Line

Many employees may “batten down the hatches” today, but as a general rule, most are aware of the potential perks of moving from one company to another. The average annual raise is 3%, dwarfed by the 10%-20% raise a talented employee can often command by finding a new place to work.

Research by insurance firm Aflac shows 49% of employees are likely to look for a new job in any given year. Confusion and dissatisfaction around employee benefits rate as driving factors in those decisions.

Although a contracting economy reduces opportunities for employees to look elsewhere, those conditions won’t last – and they’re no substitute for employee engagement and high retention.

On the other hand, 78% of employees reported that they are more likely to stay with an employer due to an attractive employee benefits package, particularly when options can be customized by the employee.

New hires begin to make those judgments early in the workplace experience, assessing if their employee benefits are worthwhile starting at onboarding. Each time employees access benefits, they reconsider whether their experience aligns with the promises a business made in the past.

Employee Benefits ROI Remains High Compared to the Cost of Recruiting New Hires

The cost of replacing an employee can range up to 400% of their annual salary for senior positions. Even entry-level jobs often lead to an expenditure of 50% of annual salary or more. There are several reasons:

  • Lost business opportunities due to insufficient human capital in key functional areas
  • The cost of sorting through low quality candidates sourced from internet job boards
  • Time and effort spent on interviewing and/or licensing Applicant Tracking software

Losing one entry- or mid-level team member today can also have knock-on effects tomorrow. More of the candidate pool are getting wise to tactics such as “lean staffing” and looking elsewhere when staffing levels dip far enough that consistent schedules and clear accountabilities are no longer guaranteed.

Employee benefits can serve as an incentive that keeps personnel anchored.

The importance of employee benefits grows significantly with tenure. Research has shown that after about $75,000, the power of money to drive contentment falls off. Other considerations loom larger in well-being, including healthcare and other employee benefits that can differentiate a company.

All in all, companies are investing less in their people. Although the average raise is higher than it’s been since 2008, variable pay—which includes incentives and bonuses—is in freefall. If you are looking for ways to control compensation costs, employee benefits provide the highest ROI.

According to the Society for Human Resource Management, only compensation and respectful treatment of employees rank higher in overall employee satisfaction than employee benefits. And although the ROI of benefits can be difficult to calculate, satisfaction directly impacts engagement, which has been studied extensively.

Higher employee engagement leads to clear competitive advantages:

  • Organizations with engaged employees outperform those without more than 200%
  • A 10% investment in engagement can add up to $2,400 profit per employee per year
  • High engagement reduces both recruiting costs (22%) and cost per hire fees (50%)

The lesson is clear: Companies that want to remain competitive should drive engagement and position themselves as employers of choice—and the way to do that is to focus on strategic employee benefits.

Smaller Businesses Should Re-Examine Capital Costs And Invest In Employee Benefits

When revenue contracts, many companies may be left wondering where they could find the funds for employee benefits. But structural changes in the workforce may provide the answer: Downshift from investments in office space and reinvest cost savings in your benefits program.

In 20019, many companies were already in the process of shifting from fixed capital costs – and traditional offices – to shared workspaces through co-location. Now, even startups are slamming the brakes on co-location in favor of remote work, which has the potential for the biggest savings of all.

What’s more, annual savings are felt on both sides of the equation:

Yes, there’s inevitably a learning curve when it comes to remote working. People of all skill and tenure levels need to figure out how to avoid distractions, set boundaries, and become self-starters. But with big savings in the offing, you have another reason to make employee benefits a priority.

While the future of the office as we know it is in doubt, there’s no doubt about employee benefits. Cash compensation might not even be missed by remote workers, while benefits create a winning difference.

Healthcare Will Remain King of Employee Benefits For The Foreseeable Future

In a world of so much complexity, which employee benefits are the most valuable?

While childcare has surged in importance in recent years, healthcare remains the big winner.

Employees are more concerned than ever about healthcare, and so are their employers, albeit for other reasons. In 2019, large companies estimated their average cost of healthcare per employee at $15,375, a 6% increase. Increases in 2021 could be even higher owing to greater healthcare utilization.

But those projections may go out the window – and healthcare could become even more important – thanks to the looming battle over a Supreme Court nominee. The fight comes at a time when multiple states, and the Trump Administration, are advancing a case that could see the Affordable Care Act eliminated.

Virtually overnight, potentially as soon as first quarter 2021, all assumptions could be null and void.

No matter how you feel about the ACA, it’s important to get ready for the upheaval, confusion, and potential for changes in healthcare that the future may hold. Luckily, ACA alternative employee benefits are already on the market. Your company may already be able to access them.

Entrepreneurs who earn too much money to get a subsidy on the ACA marketplace and have few or no pre-existing conditions are in the best position to access alternatives. Small and mid-sized companies should also be on the lookout for the best way to meet the growing need for healthcare benefits.

The pace of change in employee benefits is more than anyone asked for, but with that change comes opportunity for prepared businesses. Now is the perfect time to consider whether your benefits structure works for you and how you can expand healthcare benefits if it doesn’t.