Look Inward First: Make Investments Count
While a creative, strategic recruiting strategy is vital, small firms should first devote energy and time to locking down existing talent. After all, it’s more efficient and cost-effective to keep existing employees than attract new ones, and there’s a high probability that future employees are looking for the same things your current staff value. The Society for Human Resource Management reported last year that turnover costs between 30% and 50% of the annual salary of entry-level employees, 150% for midlevel employees and up to 400% for high-level employees, which could equate to hundreds of thousands of dollars.
Outside of payroll, benefits are likely your second-biggest line item on your profit and loss report. In a recent study, Pew Research cited pay and benefits as top reasons why employees left their jobs in 2021. While employee benefits are one piece of the puzzle when creating an exceptional employee experience, benefits are a significant portion of businesses’ operating expenses. The good news is that “better benefits” doesn’t necessarily mean more cost. In fact, throwing more money into the “system” to retain your team may not be the answer. Employees are looking for benefits that align with their lifestyle and current life stage. If what you are offering doesn’t fit their needs, they’re likely not to see it as a true benefit at all, regardless of how much it’s costing the firm.
The bottom line: You may need a benefits investment reshuffle, not a benefits upgrade. It’s time to get creative and shift investments to where they’ll get the most mileage with your staff.
Multigenerational Planning
For the first time in history, there are five generations in the workforce, ranging from Traditionalists, born before 1945, all the way to Generation Z, born after 1997. Members of today’s diverse workforce all have distinctive, and sometimes contradictory, needs and wants for benefits. MetLife’s 20th Annual U.S. Employee Benefit Trends Study showed that employees are 25% more likely to say that benefits are an important reason they came to their current employer, in comparison to results shown a decade earlier. As a business leader, how you manage these varying requirements can be the difference between winning or losing top talent.
The Risks Of Status Quo, One-Size-Fits-All Benefits Packages
Your employees are comparing your pay and perks package against those of your competitors—who may have a better handle on the needs of a multigenerational workforce. When looked at through this lens, how does your benefits package stack up? What better way to scare off top talent than by saying, “We’re going to treat you like every other employee” or “We don’t actually understand, or care to understand, what motivates you apart from anyone else.”
Offering programs and benefits that appeal to all employees is an essential part of retaining your team. Because no two employees are alike, it’s more about providing options and flexibility to allow employees to choose the benefits package they feel is the right fit and provides value for themselves and their family. Providing differentiated offerings at different price points that are attractive to lower-paid and highly compensated team members should be considered. We’re seeing success for our law firm clients who are considering or offering salary-based or role-based contributions to provide greater equity and cost for lower-paid staff— moving into and toward self-funded medical benefits plans through the use of a health savings account (HSA), captives, association plans, and other solutions that provide increased transparency, flexibility and control. These factors enable prospective decision making that isn’t available in the fully insured market and can create savings to offset other benefit investments.
Finally, adjusting plan and network design to offer choice of savings in employee contribution, point-of-sale cost and tax-advantaged savings may work—thinking differently about saving for retirement by using qualified and non-qualified plans and HSAs. The average couple will require more than $350,000 in retirement to pay for medical premiums and expenses that aren’t often accounted for in traditional retirement planning.
For those starting a family, insurance and benefits become more valuable when making the decision to stay or leave a position. Oftentimes, smaller firms offer a premium medical plan and contribute generously to individual coverage but don’t provide ancillary benefits, such as dental and vision, which are valued by staff. While the intention behind offering a rich medical plan is sound, these plans are extremely costly for families. One common trend we see is smaller law firms offering employees platinum medical coverage at no cost but providing little or no subsidy for dependents, leaving those with families to pay the equivalent of a second mortgage to insure their dependents. One alternative to consider is offering a second, lower-cost option that is still free for the employee but allows the firm to help subsidize the cost for dependents since the plan is less expensive. The net cost is the same to the firm, but it lands very differently with lower-paid staff who have families to support.
Flexibility, Mental Health and Employee Well-Being
Firms shouldn’t overlook “softer” employee benefits either. Often, these can be deciding factors in an employee’s decision to take a job, stay at that job or move on. If the last two years have taught employers anything, it’s that flexibility is king. As workers return to offices, the introduction of a hybrid model of work and providing ways for employees to work around their daily lives have all taken on a greater importance than pre-pandemic. According to the MetLife report, more than 55% of respondents said a flexible working schedule was a “must-have” in accepting a new role, up 18% from pre-pandemic results.
Greater flexibility can help improve employee well-being, but don’t let that be the end of your firm’s work in this area. The relationship between mental health and well-being has never been more important to employees, and many are looking for firms that work to address these across a variety of areas. Employers should examine a variety of options, including investigating and prioritizing diversity, equity, inclusion and belonging initiatives and policies; expanding parental and family leave benefits; providing “mental health” or “well-being” days; and training partners and managers to recognize when an employee may be suffering from burnout or a mental health crisis.
Also important may be enhancing out-of-network mental health and substance abuse benefits amid increased demand, adding voluntary life and critical illness benefits, and promoting preventive care, as preventive services dipped during COVID-19. Early detection of disease will help to keep premium costs down, especially since the providers and carriers are expecting the illness burden to be more severe in future years.
Deciphering And Funding The Benefits Your Team Values
Making changes to benefits to better align with employees’ preferences requires you to seek input from your staff to ensure you get it right. While smaller firms cannot compete financially with the larger firms that are spending big money on bonuses and salary to attract and retain talent, smaller firms do have an advantage when it comes to culture. Smaller firms’ employees have a closer relationship with the partners of the firm and often enjoy the ability to influence how their firm operates.
There’s a sense of belonging and ownership in the work at smaller firms. Use the advantages of your firm’s culture combined with an employee-influenced higher-value benefit strategy to your advantage.
Getting started with this approach doesn’t have to be complicated. Forming a benefits committee to help inform decisions and conducting an employee survey are good places to start. Simply ask employees what they’d value in a benefits program. Ask about medical, financial and nontraditional benefits. You might be surprised to find that benefits that are low cost to the firm go a long way with employees.
And if you do ask, make sure you plan to do something with the feedback. Once you have these insights from your team, get together with your workforce strategy advisor(s) to discuss how you can creatively address or chip away at employees’ requests over a reasonable time. The focus can initially be on reallocating existing funds to better align with what employees value. Undoubtably, there will be additional benefits that you’d like to provide your team, but you don’t feel you have the budget to implement. One creative way to fund a more diverse benefits program without an additional hit to your bottom line is through the employee retention credit (ERC).
During the heart of the COVID-19 pandemic, as employers of all sizes were struggling with costs and employee retention, Congress passed legislation meant to minimize the damage to the country’s workforce. This legislation, called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), included an ERC, which allowed employers of a certain size to claim a tax credit for a certain percentage of an employee’s wages they retained during the pandemic. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 made changes to the CARES Act’s employee retention tax credits, including extending the credits through December 31, 2021. There is still plenty of time to take advantage of the ERC. To monetize the credit, companies will need to amend their quarterly 941 filings to the IRS. The deadline to monetize the credit through amended 941s is three years. 941s are generally due by the last day of the month following the end of the quarter. For instance, Q2 of 2020 would be due by the end of July 2023.
With the ERC, employers can receive up to $21,000 credit per employee; however, we are seeing most smaller organizations receive in the ballpark of $7,000 to $11,000 per employee credit. This credit can provide you with funds that you can invest back into your people and business to help lay the groundwork for a profitable 2022 and beyond.
As our country comes to grips with what work will look like post-pandemic, it’s important to remember that smaller organizations have distinctive qualities that make them well-suited to the quickly evolving working landscape. Many of the post-pandemic changes are likely here to stay, as younger generations continue entering the workforce in coming years. Ensuring the importance of employee well-being and mental health and providing for your employees’ present and futures is vital for your firm’s future.
Prepare for tomorrow, today!
