How to use Benefits as a Recruiting and Retention Tool

You can almost feel the anxiety and tension many people face in today’s working environment. The questions running through our minds are "Am I going to have a job tomorrow?" and, "How am I going to afford it all?”

The present economic situation has forced many employees to work longer hours. Many downsized businesses are asking their remaining workforce to pick up the responsibilities of more than one position.

Productivity, profits and retention go hand in hand. Despite the economy, people today need a work environment that allows for maximum flexibility. A flexible work environment promotes greater productivity, increases retention and creates more dedicated workers. Benefits have increased in importance to help counterbalance the complex needs and wants of the workforce. In 1960, businesses spent $23.7 billion on benefits. In 1980, they spent $266 billion, and in 1994 businesses increased their spending on benefits to $747 billion. Smart employers are realizing that the plain vanilla, take-it-or-leave-it approach may diminish their ability to attract and retain employees as well as place current employees in a position to question their loyalty and dedication to stay. Let’s consider the following:

• Employees who like where they work will help the company make more money. An 800-store survey conducted by Sears showed that when employee attitudes improved by 5 percent, customer satisfaction jumped 1.3 percent, consequently increasing revenue by one half a percentage point. Employee attitudes impact the bottom line!
• Aetna Life & Casualty Co. reduced resignations of new mothers by 50 percent by extending its unpaid parental leave policy to six months, saving the company $1 million a year in training, recruiting and hiring expenses.

Cynthia Victor, HR Manager for Prattville Machine & Tool Co. in Peabody, MA believes that they have low turnover in their organization because “benefits are an important factor in our manufacturing environment.” Employees at Prattville rarely leave the company and if so, it is for other reasons than benefits, pay or the work environment. The management at Prattville “feels that is important to offer a quality benefits package” which works well alongside their commitment to providing a great work environment.

Providing HR support to mid-sized and smaller companies, Ruth Liebermann, Managing Director of HR Insourcing LLC, indicates that the challenge of balancing increasing benefits costs with being market competitive as an “employer of choice” for current and future employees has been a moving target for 5-10 years now.

There are a number of trends Ms. Liebermann and her HR team see across organizations. The first is the significant information in the media about rising costs of health insurance (particularly in a presidential election year) means employees and potential employees are more informed about the meaningfulness of these costs and more accepting of the related increases in their own health-related out-of-pocket expenses. Certainly there are some differences from employer to employer in terms of health plan design features, what is covered, etc., but gaining in importance are other benefits such as paid time off (PTO). There seems to be a slowly increasing interest in “bundling” PTO, which gives employees a certain allocation of days to be used discretionally within the parameters of the program.

The varying needs of two career families, multi-generations in the workplace and the necessity of being “connected” beyond the normal work day has also generated increased interest in flexible work schedules, telecommuting, job-sharing, and “comp” time. Employees and potential candidates recognize the significant time spent working and seek an environment that recognizes this.

The second trend Ms. Liebermann has experienced is more creative design features by employers in the benefits programs offered. To offset higher costs, employers are looking to their benefits brokers and consultants to identify meaningful ways to keep containing these increasing costs.

Features such as Flexible Spending Accounts, Health Saving Accounts and Health Reimbursement Accounts have proven to be cost-effective plan design mechanisms.

Other features include wellness programs promoting employee health; helping to manage chronic illnesses such as diabetes, high blood pressure, and stress.

The third trend employers are paying more attention to is broader communication of total compensation. Employers are looking to better communicate total compensation and the “hidden paycheck” that health insurance, vacation, holidays, etc. represent in terms of value to employees and real cost to employers. Particularly younger and entry-level employees need to take these items into account as important elements the employer also provides in addition to their hourly pay or salary.

As a final point, industry competitiveness is clearly important – if your local competitors are offering 100% company paid health benefits and you are cost sharing 50/50 with your employees, the dollar differences are an immediate and obvious competitive disadvantage, as well as what this “disconnect” may imply to potential candidates. Their perception may be that “if this employer is so out of touch with what benefits are being offered by their best competitors, what other factors are they ignoring that may be relative to my opportunities and development if I were to join the company”, Ms. Lieberman highlights.

Here are a few guidelines to follow to help build a successful work environment:

1. Focus on paying your employees well and creating a stimulating, rewarding environment.
2. Improve the quality of the relationship between the employee and his or her supervisor.

A relationship that is not good will cause conflict and low productivity eventually persuading a good employee to leave.