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Beyondthe Paycheck

Employers Get Creative with Benefit Packages
Beyond the Paycheck

Beyond the Paycheck

Employee benefits aren’t the one-size-fits-all packages of 20 and 30 years ago. Even in a slowing economy, employers say it’s difficult to attract and retain top talent with salary and health insurance alone, and many have become creative with signing bonuses, flexible hours, work-from-home options, and lifestyle benefits such as paid day care and tuition reimbursement — often crafting individual packages for the workers they most value. But it’s not just about staying competitive; evidence is mounting that younger workers now expect such perks, and that has changed the game completely.

It’s been said countless times before: the youngest generation in the American workforce, the group known as the Millennials, don’t want to adhere to decades-old workplace mores.

In short, they want more time off, more flexibility to work outside the office, and less supervision. It’s enough to give a manager — especially one with old-school tendencies — an anxiety attack.

But at a time when a sagging economy is beating up on companies’ bottom lines, some creative employers are using the preferences of younger workers to their recruiting advantage.

“In the past, benefits were strictly looked at in terms of monetary compensation,” said William Ward, executive director of the Regional Employment Board of Hampden County (REB). “But with the new generation of workers, these Millennials, employers are looking at other ways to meet their needs.”

One might wonder why such worker demands are even an issue in a down economy, but companies still put a high value on attracting and keeping the best talent, not just anyone.

“Retention at a time like this is really not so much a problem because people tend to stay where they are when the economy goes down and there’s not as much hiring going on,” said Sandy Reynolds, executive vice president of Associated Industries of Mass. (AIM). “During times like that, people tend to stay where they’re comfortable and have a sure thing.”

That said, an AIM survey indicates that 20% of companies in Massachusetts are looking at ways to decrease the compensation budget, meaning that workers will see smaller pay increases in 2009 — and employers will be seeking ways to offset the dissatisfaction that will cause. They can do so with flexible hours, telecommuting, and other lifestyle benefits.

“I think employers have gotten smarter and realized the tremendous mutual benefit in being open to these types of things,” said Reynolds. “Years ago, AIM was one of the few organizations that had a very liberal way of looking at working from home. That used to be something that differentiated us, and we used it as a recruiting tool.

“We still do,” she continued, “but we’re finding that more and more companies have seen the light and realized that they can trust people, that people work hard when no one is looking at them. A lot of managers have progressed beyond the attitude of, ‘if someone’s not here, I can’t be sure they’re working,’ and they’re learning techniques of managing people who work in non-traditional ways.”

From the Home Office

Ward realizes that some traditionalists might scoff at the idea of letting workers, especially those without many years of workplace seasoning, essentially set their own schedule. But studies increasingly show that Millennials not only prize flexibility, but also are more productive when given some.

“It isn’t so much that employers are, as some say, loosening the rules to make it easier for certain people,” he told Business-West. “In fact, the companies that are innovative and responsive to employees’ needs realize that this is how to get the best work out of their people.

“There’s a trend toward working at home in situations where the work is driven not by seat time, but by production and hitting your goals,” Ward continued. “A lot of times, you hire people who are coming from a flexible environment, maybe younger workers whose first jobs were in technology-driven companies, and it didn’t matter where they sat, but who they networked with.”

But it’s not just the young crowd that’s finding freedom and productivity within such work models. Another group that clearly benefits from the trend is working mothers. Ward said several of the REB’s 22 employees work at home because of family issues or distance, and they are connected to the downtown Springfield office through technology, so he can see the work they’re doing in real time.

“We’re performance-driven here,” he explained said, noting that he values workers that have a productive mentality, no matter what schedule they require. He cited one employee who wanted a full-time job, but also wanted to continue teaching a course at a local college. “Someone who’s in the mode of teaching and always learning, that’s someone I want to make arrangements to hire.”

Of course, the model doesn’t work with all vocations, especially those with customers visiting the workplace, he noted, but some corporations have been especially creative, such as JetBlue, which staffs its entire ticket-ordering operation in Utah with stay-at-home mothers.

The benefit of added flexibility doesn’t apply only to where one works, of course, but when — and how much free time is part of the deal.

“Outside of the insurance benefits, you’re seeing more paid time off for employees,” said Meredith Wise, president of the Employers Assoc. of the Northeast. “Rather than starting with one week for the first six months or year, some are jumping right to two weeks or three weeks.”

Another option growing in popularity is ‘banks’ of time off available to use at any time, instead of the typical, say, two weeks vacation, five sick days, and 10 vacation days. “That way, you’re not asking, ‘are you sick today, or do you just want the day off?’

“Employees can bank time and use it as soon as they acquire it,” Wise continued. “If they’re not trying to save up for a two-week vacation, they can make some long weekends or take some time off in the middle of the week. That sort of flexibility is certainly attractive to people.”

Other employers allow employees freedom to adjust their hours as needed, sometimes on the fly — again, reflecting an emphasis on getting projects done over counting hours.

“On one end of the spectrum, Gen-Xers and Millennials want to do things on their own schedule,” she said, “and at the other end, Baby Boomers may have aging parents that might have a doctor’s appointment, or they might want to spend time with their grandchildren.”

Ward said such open thinking when it comes to where and when work gets done has gained traction in the past few years.

“There has been some movement in that direction,” he said. “Clearly it’s being talked about in HR circles more and more, these talented people who value flexibility and their ability to get the job done without necessarily being so strictly overseen. They feel like they can manage their own lives.”

Offers They Can’t Refuse

Wise noted that attractive benefits help a company’s bottom line on multiple levels, and one that shouldn’t be overlooked is the cost of replacing employees who become dissatisfied and leave.

“The cost to replace an employee can be anywhere from 30% to 40% of somebody’s salary up to 150%,” she said. “That’s a tremendous number. It’s kind of hidden because you’re not writing a check for that number, but you’re spending it on recruiting and retraining.”

That’s why it makes sense, she said, even for companies who can’t afford to boost salaries to try to compete in ways that don’t have a major impact on bottom-line operating costs.

Even companies that do see compensation as primarily financial don’t always administer it in a one-size-fits-all manner. Pay raises tied to incentives are becoming more popular; according to a recent AIM survey, 42% of companies report that nonexempt and hourly employees are eligible for incentives, compared with 35% in 2007.

One type of incentive rewards long-term commitment, Wise said, noting that many companies use this sort of ‘discriminatory benefit’ to target their most valuable employees.

“I might offer you a package, an incentive that says, if you stay with me five years or 10 years, at the end of that time, I’ll give you a raise that might be equal to 50% of the base salary, something like that,” said Wise. “Because it’s on an individual basis, as an employer, I can’t take a tax deduction for what I’m spending, but if you’ve got skills and talents that I need to have, I can tie you to my organization for five or 10 years.”

That arrangement appeals to people at certain stages of life, she added. For example, someone with two kids, ages 4 and 6, is going to be staring down college costs in a little more than a decade. By offering to double his starting salary after 10 years, he can bring a little financial-planning reassurance to the worker, while not having to worry about losing the assets he brings to the company. Employees nearing retirement age might also find value in such an offer.

“It gives him an incentive to stay while not taking an immediate hit to the company’s bottom line,” Wise explained.

All those who spoke with BusinessWest agreed that, whatever shape the economy is in, employers are serious about recruitment and retention.

For some companies, that means offering signing bonuses, tuition reimbursement, or even day care. In addition, Reynolds has been pleasantly surprised by the response of employers to the state’s health insurance mandate, which requires all companies of a certain size to provide coverage to its employees or pay a fair-share assessment of up to $295 per non-covered employee.

“That’s a lot less expensive than providing group insurance, but we’re not seeing employers stopping coverage, she said. “Some have, on an isolated basis, but not anything like we feared.”

It all goes back to keeping employees happy, Wise said.

“With the skills gap we’re facing, you can’t afford to lose people,” she said. “And if you have an opening, you have to make sure to bring the right person in.”

A person who will no doubt be asking, “what’s in it for me?”

Joseph Bednar can be reached at[email protected]