Employers that are raising salaries and still seeing people leaving are not considering all the challenges that this new environment is creating both for employers and their own businesses. (Photo: Shutterstock)
"The Big Quit," also known as the Great Resignation, has had a dramatic impact, not just on employee turnover and the loss of talent, but across all aspects of business from supply chain challenges to workforce law changes, product pricing impacts and wage and benefit budgetary concerns. With turnover surging at more than 50% across the country, and inflation surpassing 7% at the end of 2021, it is important to look at the impact all of this has on employee wages.
When the cost of everything else is increasing, if wages don't keep pace, then the buying power of employee compensation drops, and the value of your employees' compensation also drops. Add to that, the average workday has lengthened by almost an hour since the onset of the pandemic, and despite working longer hours, workers are also taking fewer breaks, according to a recent Deloitte Human Capital Trends special report. It isn't surprising that people are looking for new opportunities and more money.
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The fact is that the value of current compensation is diminishing, and it is causing employers to find new solutions. Wage increases might not be enough. Employers that are raising salaries and still seeing people leaving are not considering all the challenges that this new environment is creating both for employers and their own businesses. Just knowing that the impact of inflation to a highly compensated employee may be different than to an hourly employee is prompting employers to get creative. This creativity, while feeling futile at times, may be short-term as this level of inflation might not last for the long term.
More employers will look to help mitigate the impact of inflation and changes to the workload through retention bonuses, sign-on bonuses, or PTO benefits; however, PTO is only good if employees can use it. Otherwise, it has the opposite effect leading to lower morale and increased turnover.
The effect of inflation on the cost of health care and other employee benefits is another factor that employers should keep an eye on as an area of opportunity to improve compensation packages for employees. There are important advantages to allocating a greater part of the investment in employee compensation to employee benefits.
- First, the employer-paid portion of health insurance premiums are considered 'fringe benefits' that may be considered a business expense, and therefore, tax-deductible at both the state and federal levels.
- Second, there are a number of issues that truly distract employees from being productive while at work, and the top concerns are their physical health or the health of their family members, and the worry associated with the cost of treatment if they get sick.
- Finally, investing in providing full coverage for employees' health benefits, or covering a larger part of the cost of health insurance, or life and disability insurance, can have an impact on productivity and help with long-term retention. But, having all employees covered because an employer contributed so highly to their health plan, can have a longer-term positive impact on costs, by lowering the overall risk and therefore premiums of the whole group.
Employers have been looking at creative ways to improve the perceived value of employee benefits beyond just covering the traditional insurances, but in today's environment of both pandemic illness and inflation, finding a more human side to providing rewards and benefits will become increasingly important. Providing coverage that will protect employees' health and financial wellness in both the short term and long term, and ensuring those benefits are tax-deductible, should be a win-win for employers and employees in this challenging time.
This is just the beginning of the transformation of overall compensation that employers will face in the coming years. At Engage PEO, we are doing our part by working with different vendors to find solutions for our employees that help meet some of the fastest-growing areas of concern, like student loan debt management and experiential reward programs so that employees see real value in the recognition they are given. It is time for benefits administrators and providers to recognize that employees value benefits differently and that we must strike a new balance between wages, alternative compensation and bonuses, and benefit programs moving forward.
Denise Stefan is president of Engage PEO. Steve Scott is chief operating officer of Engage PEO. Engage PEO delivers comprehensive HR solutions to small and medium-sized businesses, sharpening their competitive advantage. It is a market-leading, national PEO licensed in all states with licensing requirements and serves clients in all 50 states.
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