Although the most headline-grabbing economic issue in the U.S. during the last decade was the ballooning unemployment rate, this particular woe has been decidedly declining in direct proportion to the rise in jobs. With the Department of Labor Statistic reporting unemployment holding at about 5.6% – 5.7% since October 2014, job gains are still being reported in retail trade, construction, health care, financial activities, and manufacturing in January 2015. Ironically, though, a decline in unemployment is now accentuating a different concern for U.S. businesses; namely, the need for more highly-skilled employees. U.S. companies report wanting to only hire people who are “job ready.” But such skilled workers are increasingly harder to find.
Indeed, recent surveys of business executives indicate that finding appropriately skilled workers is their biggest worry, and they foresee it getting worse. In 2015, businesses are facing the reality that, with little slack in the U.S. labor market plus a global skills-job disconnect, efforts to attract enough employees to fill high-skill jobs is becoming increasingly difficult. If skills shortages do increase in 2015, as expected, businesses will need to get more creative in how they attract and keep top talent long-term. In addition to increasing wages, which have been stagnant, employers will need to offer benefits that are most valued by employees. According to the late Steve Jobs, “I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1. Given that, you’re well advised to go after the cream of the cream. A small team of A+ players can run circles around a giant team of B and C players.” Indeed, in the long run, companies with the best benefits will be the most successful simply by attracting and retaining the most innovative and productive staff.
Which Benefits are Most Beneficial?
Last week, we looked at how sick leave and vacation time (or other creative forms of ‘time-off’) were two of the most valued and valuable benefits companies can offer employees. But it turns out that there are other benefits that employees desire just as much, if not more, depending on their specific circumstances. Here are five more practical benefits that score high with employees.
1. Quality Medical and Dental Insurance
While many businesses may already provide health insurance for its full-time employees, not all insurance plans are created equal. Some insurance plans are more generous than others. Key variables — such as what portion of the premiums are paid by the employer versus the employee, the employee’s deductible and co-payments, the services covered, and the percentage of coverage for each service – all affect how much money an employee pays out-of-pocket for health insurance. For example, when it comes to the premiums paid by employer versus employee, Forbes reported that the average cost of healthcare for a typical American family of four in an employer-sponsored health plan in 2013 was $22,030. On average, employers paid $12,886 of that total cost (about 58%) while employees paid the rest. Also, the freedom to use doctors in and out of network, purchase prescription medicines in bulk at better prices, and other such freedoms are also desirable as they too affect out-of-pocket cost.
It used to be that the average American did not know how much their health care coverage cost his employer. It was one of those benefits that many took for granted because they didn’t see it on a tax or wage form. But that has changed since Obamacare. The reporting requirement under the new law made more taxpayers aware of the actual cost of their health care benefits. In box 12 of each person’s W2, it shows the value of health care coverage provided by the employer. The amount reported in box 12 includes both the portion paid by the employer and any amount paid by the employee.
The rising cost of health insurance coupled with an increased awareness of the cost of this once-taken-for-granted benefit makes health insurance a key benefit that most every employee wants, needs and values. Businesses that want to woo top talent to join or remain with a company can step up their game by offering a robust health insurance package. That could include vision and dental insurance too. Or it could offer 100% employer-paid premiums. Or it might deliver very low deductibles. It could even include such perks as a low cost for a family health plan. Best of all, health insurance is a benefit that pays dividends not only to the employee, it also benefits the company by ensuring a workforce that can afford to stay healthy by getting preventive care and medical attention when needed.
2. Retirement Benefits
According to the Bureau of Labor Statistics, the median age of all employed people in the U.S. today is 42. Moreover, about 45% of the U.S. population is aged 45 or older. That means that nearly half of all people working are already about 20 years or less away from retirement at age 65. Given the precarious state of government programs such as Social Security and Medicare, most elderly people will need to have additional money saved in order to be able to afford to retire. That may explain why a company’s pension or 401K program is of growing importance to many employees.
While many companies had drastically cut back on their pension or retirement savings programs during the Great Recession, that is changing as skilled labor is getting hard to find and keep. According to financial experts, when considering a potential employer, a good standard for a retirement program is a payout of at least 50 percent up to 6 percent of the employee’s pay. That means, the employee contributes up to 6 percent of his/her pay and the company matches half of whatever the employee contributes. Of course, 100 percent is ideal. In fact, more and more companies are once again offering generous retirement programs as part of their benefits package.
For example, Chesapeake Energy, an oil and gas-exploration company based in Oklahoma City, matches 100% of every dollar an employee saves for retirement up to 15% of the employee’s pay. So if a Chesapeake Energy employee (age 40) earning $80,000 a year saved 15% of his salary for retirement ($12,000 per year which is $230 per week) and Chesapeake Energy also contributed $12,000 a year to that employee’s retirement fund, that employee would be putting away $24,000 a year for retirement. In 20 years, that employee (age 60) would have saved $ $664,235 for retirement (if the money was invested and earned a consistent, modest 3% return annually). Best of all, of that, the employee’s contribution would have been just $240,000 (a little more than a third of the total). Now that is an excellent employment benefit. A talented employee would not be easily tempted to leave that company and go work elsewhere.
Genentech, a San Francisco-based biotech company that makes drugs that treat a variety of life-threatening medical conditions, offers a pretty healthy retirement plan, matching 100 percent up to 5 percent of an employee’s pay. Plus, the company automatically makes an additional 2 percent contribution, regardless of the employee’s participation in the retirement plan. Genentech, a company that consistently ranks as one of the best places to work, understands the need to keep top talent. Even though they were purchased by Swiss drug maker Roche in 2009, Roche was careful to preserve the culture and practices of the company, which has the reputation of being a great place to work. In fact, Roche handed out $375 million in retention bonuses to the ranks of Genentech to prevent defections.
Microsoft offers to match 50% up to 6 percent of an employee’s pay. Employees are immediately eligible and immediately 100 percent vested. Over 87 percent of employees participate in the retirement plan. Viacom, a major entertainment conglomerate that owns CBS, Nichelodeon, etc., also does a similar plan of 50% match up to 5% of an employee’s pay, and vesting is offered after one year. Aflac, the Georgia-based insurance company, offers a 50% match of employee contributions up to 6 percent but also offer a traditional pension plan that follows the rule of 80: When the employee’s age and years of service add up to 80, that person can retire no matter how old. So an employee that started working for Aflac at age 20, and worked there 30 years, could retire at age 50.
USAA, which provides financial services to military families, has a rich retirement plan for its employees: They match 100% up to 8% of an employee’s pay, and contribute 9 % every year to a cash balance pension plan. Plus, if the company hits certain performance targets, USAA provides its employees with a bonus contribution to their retirement savings, which varies from 3 to 9% depending on the employee’s age. That means an employee could end up saving the equivalent of 19 to 25% of their pay each year with only a third coming out-of-pocket. Employees are automatically enrolled and get their first contribution with their first paycheck and the account is vested after just two years. The company also offers subsidized health care for retirees.
Clearly, companies across all industries are placing high value on retirement benefits as a way of luring and keeping top talent.
3. Flex Time
Increasingly, employees are looking for flexibility to balance the demands of work versus home. In turn, employers are responding by allowing employees to work nontraditional schedules like 7-to-3 or 8-to-4 so they can be at home with kids in the afternoon or go to school in the early evening. Or employees can work 9-to-3 and then work two hours from home in the evening. Allowing employees flexibility with schedules in return for quality work is a key way to attract and retain top talent. Parents with small children or employees with an aging or sick parent may desire flex time because they are at a place in their life where they’d need flexibility over a raise or promotion.
4. FSA Accounts
Flexible spending accounts (FSAs) allow an employee to contribute a predetermined percentage of pretax pay to an account that can then be used to pay for qualifying expenses. Depending on the type of FSA, those expenses might include childcare or medical costs that aren’t covered by health insurance. At the end of the plan year, any unspent money in an FSA is forfeited.
5. Education / Training Support
Many companies now offer employees financial support for certain higher-education expenses. Those programs can take many shapes. Some companies, for instance, offer a Tuition Assistance Plan which reimburses some or all tuition and fees for undergraduate or graduate courses that help an employee to obtain, maintain, and improve the skills needed to develop their career. For example, Raytheon, the defense technology behemoth, pays up to 100% of college tuition for employees for approved majors, including graduate degrees. Deloitte, one of the Big 4 accounting firms, covers up to $10,000 per year in advanced degree costs, provided employees have given the company two years of service and will commit to returning to the company after they receive their degree. Smuckers, the jelly giant, reimburses as much as 100% of employees’ tuition costs for company-approved courses. BP offers up to 90% tuition reimbursement for full-time employees to take classes at accredited universities that assist in educational development relevant to employees’ roles at the company. Starbucks the king of coffee, pays for all employees’ last two years of college, and will also foot the bill for part of the first two years. These companies understand that helping their employees augment their skills is good for both the employee and the company.
In addition to tuition reimbursement for employees, some employers also offer grants for the dependent children of employees to get an education. Similarly, some employers offer loans at favorable rates to help employees manage the financial burden of providing higher education for their dependent children.
While these perks are desirable, they aren’t the kind of over-the-top bennies that only elite tech and bio-tech giants can afford. Forget game rooms, granola stations, and gift baskets. Employees prefer the kind of real, tangible, and practical benefits that make real life – life beyond work – easier. And that will foster more company loyalty than the coolest foosball table ever can.
Quote of the Week
“The competition to hire the best will increase in the years ahead. Companies that give extra flexibility to their employees will have the edge in this area.” Bill Gates
© 2015, Keren Peters-Atkinson. All rights reserved.
