Recruiting new employees is more important than ever. With the world opening up more and more as the COVID-19 pandemic is combated by increasing rates of vaccinations and a developing sense of herd immunity, employers are desperate to return to pre-COVID levels of staffing (or even a larger level of staffing!!) to respond to consumers’ pent-up demand and get a cut of an observed increase in spending. More than half of small business owners expect the small business climate to return to normal within 6 months. That isn’t much time to rebound in terms of labor resources and new hires. By some accounts, small businesses are facing a critical worker shortage and have fewer employees than is necessary to run their business at all.
Small businesses are having a hard time recruiting new workers, for a number of reasons. The US Chamber of Commerce reported that less than half of small businesses who are actively hiring report that it is easy to find candidates that have the experience they need and skills necessary to do the job. The Society for Human Resource Management (SHRM) says that small business human resources professionals’ and recruiters’ top concern is recruiting and retention, and because of a “lack of bench strength and expertise” they often struggle more than larger companies. This is especially true for employees and potential recruits that are women, people-of-color, and other underrepresented minorities according to McKinsey’s sixth annual Women in the Workplace report.
One of the ways to bolster your profile when being evaluated by potential employees is to strategically offer “discretionary benefits”, benefits that are not required by the federal government (like worker’s compensation, unemployment insurance, and social security). These benefits are one of the most important ways you can differentiate yourself from your competition to job candidates in the labor market while also making your business a rewarding, supportive, and desirable place to work for new and existing employees. 92% of employees say that benefits are important to their overall job satisfaction
In this post, we’ll discuss the most important discretionary benefits that workers want and provide guidance around how small business owners can implement these discretionary benefits into their workplace.
What benefits do workers really want?
Wage-based compensation is only one component of the compensation package offered to and considered by potential employees (and employees are also expecting higher wages, but that’s off-topic). According to Bruce Elliot from the SHRM, the typical employee benefits package is worth between 25-40% of an employee’s base salary – that’s a lot!
In today’s tight labor market where potential employees have a lot of leverage over desperate employers, discretionary benefits have become an increasingly important part of an employer’s competitive advantage in the labor market. According to Glassdoor, 57% of people say that benefits and perks are a top priority when it comes to their job search and in the decision-making around accepting job offers.
The benefits workers are demanding have also changed. 10 years ago, the most important benefits were different from what they are now (though some have stood the test of time). Small business owners and small business human resources professionals need to stay abreast of the latest market intelligence concerning desired benefits in order to stay competitive. Here’s a breakdown of some recent pieces of research and reports.
The most common employee benefits are paid time off, health insurance packages, retirement funding (like 401ks or 401k matching programs), overtime pay, paid medical/bereavement leave, and disability/life insurance according to the Clutch 2018 Employee Benefits Survey. According to Glassdoor’s Employment Confidence Survey 80% of employees, especially those who are 18-34 and 34-44 years old, prefer additional benefits or perks to a pay raise. Younger employees also disproportionately desired benefits like tuition reimbursement, skills training, and student loan forgiveness.
According to a recent survey by benefits provider Unum, the most popular perks and benefits in the eyes of employees are the following (percentage indicates the proportion of people who said that particular benefit was the most important to them)
- Paid time off (35%)
- Flexible or remote work options (27%)
- Paid family leave (24%)
- Health/fitness benefits (19%)
- Financial planning (18%)
- Professional and career development resources (9%)
What can small businesses do with this information?
That was a lot, and rationalizing all the data and reports can be a lot for small business owners who don’t have significant amounts of time to dedicate to developing internal views about their small business’ benefits packages. Below, we’ve created a list of the most important employee benefits in three tiers (“Table Stakes”, “Nice To Have”, and “Very Competitive”) as well as their definitions.
These are examples of the discretionary benefits that you have to have in order to stay competitive with job seekers.
- Paid Time Off (PTO): While we’d love for our employees to work every day of the year and continue to generate value for our small business, they’re not robots. Employees need to be able to take time off, outside of the usual federal holidays, to recharge, go on trips and vacations, and spend time with friends and families. Paid time off programs allows employees to do this relatively stress-free as they won’t be giving up income when drawing from their “bank” of PTO days.
- Health Insurance/Healthcare Benefits: This is a very common benefit that ties health insurance, like medical or dental plans, to a person’s employer. If you don’t offer at least market standard health benefit plans, you’re going to have a really hard time hiring anyone.
- Retirement Benefits: Retirement benefits are a bit of a vague category, but they typically entail a 401(k) plan and/or a 401(k) contribution matching program. They could also include other retirement vehicles like IRAs, profit-sharing agreements, or Employee Stock Ownership Plans.
- Overtime Pay: This is additional pay for extra work above and beyond what is contractually or typically required of a worker. If you pay hourly at a $25 per hour rate for 40 hours per week, you might offer a $35 per hour rate for any approved hours worked past the 40-hour threshold.
Nice To Have
These are examples of the discretionary benefits that can make you stand out from the typical company in the job market but can be pricey.
- Flexible Hours: This past year of dealing with the COVID-19 pandemic has shown that flexibility, just in general, is more important than ever. When appropriate, offering employees the ability to work on flexible timelines (not just the usual 9-5) can be a very desirable perk.
- Remote Work Options: While many people were forced to adapt to remote work during the pandemic, this practice was around before the coronavirus and many leading companies have implemented partial or total remote work policies. When appropriate, this is a VERY competitive benefit, especially for working parents and those who live farther from the central office.
- Paid Family Leave: According to the SHRM’s 2019 benefits survey, only 34% of employers offered women paid maternity leave. This number is likely much lower for small businesses. If you’re able to offer even a small amount of time off for recently minted or expecting parents, you’ll show that you truly care about your employees’ lives past their ability to generate value for your firm. These benefits typically entail long-term periods of PTO, which can range from a month to a year (in the most generous cases).
- Fitness Perks: Health and fitness is very popular, and is only getting more and more popular. Partnering with local gyms, yoga studios, and other fitness centers to compensate employees for memberships or have in-workplace classes is both a generous benefit and can help produce a happier and healthier workforce.
- Professional and Career Development Resources: Offering skills training, professional mentoring, career coaching services, and other professional development services to your employees shows that you care about them past their work product and will invest in helping them grow throughout their career (whether they stay with you or not). This benefit is especially appealing to younger professionals who are just starting their careers.
- Tuition Reimbursement: Similar to the benefit described above, tuition reimbursement for classes taken at local community colleges and other educational institutions (online or in-person) is a great way to both develop your workforce and stand out from other employers.
These are examples of the discretionary benefits that make you REALLY stand out from the competition and attract top talent but can also be quite expensive or difficult to implement depending on the nature of your business or the location of your office.
- Four Day Workweek: This is the creme-de-la-creme of perks for the modern workforce. If you’re able to run a successful business paying full-time wages and only requiring employees to work four days a week, you’ll be an extremely desirable small business to work for. Microsoft Japan did an experiment with 4 day work weeks and saw productivity jump 40% too, which isn’t half bad if you ask me.
- Free Food in Office: Having snacks, coffee, catered lunches, and other free food (especially healthy options and choices for those who are vegetarian/vegan) in the workplace takes a big stressor off the back of your employees. It allows them to focus on their work without worrying about having to pack a lunch/where they’ll go and get lunch. While 56% of employees report that they are “very” or “extremely happy” at work, 67% of workers with free food at the office report that level of satisfaction. You can also pair this with professional development by hosting “lunch-and-learns” to get two birds with one stone/create a hybrid benefit. This is a great way to boost employee engagement in the office.
- Pet Insurance/Pet-Friendly Office: Who doesn’t love their pets? Pet benefits are attractive to people of all ages, and everyone knows that vet bills can be very costly.
- Student Loan Assistance: Especially for younger people, student loan assistance benefits can be a HUGE HUGE plus when considering where they want to work. Student loan debt has grown exponentially over the last few years and many graduates are left with piles of debt that they’re unsure if they can manage. If you’re able to find a way to include this benefit in your small business’ benefits package, you’ll have a big in with young talent.
Our best advice for building your benefits package
Now that we’ve covered what employees want and how each benefit stacks against each other, let’s discuss some practical tips for how to implement what we’ve learned.
- You Don’t Have to “Go Big or Go Home”: In fact, that’s a terrible idea. Building a benefits plan is a holistic process that requires input from employees and evaluation of what is affordable for your business and appropriate for your company culture. For example, if you don’t have all the “Nice to Have” benefits, that’s okay!! Choose the ones you think are most impactful or that are at all feasible – something is better than nothing.
- Getting Employee Input is Imperative: Offering a pet insurance plan is useless if none of your employees have pets. The same goes for offering fitness perks if no one wants them. Ask your employees what they’d like to see added to their benefits plan, and then consider those asks in the context of your budget.
Do Some “Opposition” Research: Try to find out what your main competitors are doing in terms of benefits and compare that to yourself. Are you falling behind, about even, or ahead of the game? This is the most important thing that you can do to make sure you’re winning the recruitment game on the benefits front.