In normal market conditions, people who have been unemployed due to an economic slump generally desire to find a job when the economy perks up. But times are far from normal in many places and industries. One of the most pressing concerns employers face today is labor quality and availability, according to findings from The CFO Survey for the first quarter of 2021. (See “CFOs Disclose Top Concerns and Employment Outlook” below.)
The following provides an overview of causes for the employee shortage in some areas and how employers can attract and retain qualified workers.
Reasons for the Shortage
Employers offer various explanations for the current labor shortage:
• With federal funds added to state unemployment insurance benefits, some workers can earn more by staying on unemployment than they would earn by accepting low-paying jobs,
• Parents of children who are attending school remotely lack the childcare support to leave home to go to work,
• Some people are afraid of contracting COVID-19 at a worksite, and
• Some Baby Boomers have adopted a you-only-live-once attitude and decided to retire.
The first factor might soon wane. President Biden recently instructed the U.S. Department of Labor to work with states to restore requirements that unemployment benefits only be given to people who actively seek jobs and don’t turn down “suitable” job offers. In addition, some states — including Montana, Florida, Iowa, Tennessee, Massachusetts and others — have already taken action to eliminate the incentive to stay on unemployment benefits when viable job opportunities exist.
The American Rescue Plan Act (ARPA) also offers relief to help parents return to the workforce. Specifically, the ARPA provides subsidies for childcare providers that could expand the availability of those services on an affordable basis to parents of homebound students.
On the state level, in a move that could be followed by other states, Montana recently announced a plan to pay a bonus to unemployed individuals “who rejoin the labor force and accept and maintain steady employment for at least one month,” according to Governor Greg Gianforte. Montana will use money granted to states under the ARPA to fund this effort. Other states might follow Montana’s lead without dipping into their own coffers.
Even with government relief measures, you might still have trouble over the short run finding qualified workers to fill your job openings. Money talks, so you might consider offering the following:
• Signing bonuses
• Stay-bonuses (awarded to employees who stick around for a prescribed period)
• Above-market wages
Before increasing your compensation budget, however, it pays to check your employment value proposition (EVP). HR executives have used this term for decades. In a nutshell, EVP refers to everything that employees appreciate about working for your company.
A more comprehensive definition from HR technology company Smarp is “an ecosystem of support, recognition and values that an employer provides to employees to achieve their highest level of work.” Pay, while important, does not always top an employee’s list.
When evaluating your EVP, start by talking to your loyal and productive employees to find out what they value most about working for you. They will probably mention intangible “benefits” you don’t even recognize because they come naturally. Examples might include the following:
• Respect and concern for employees’ well-being
• An upbeat corporate culture
• Flexible work arrangements
• Learning and training options
• Professional growth opportunities
In a small company, there might not be much of a career ladder to climb. Still, few employees get excited about positions they perceive as “dead-end jobs.” When employees believe you will do your best to provide jobs with more responsibility and pay whenever possible, they will do more to help your company grow and provide additional opportunities for advancement.
Traditional Benefit Offerings
Employees also value traditional benefits, such as health plans and 401(k) matching contributions. These elements of an employee’s compensation package can be costly, however.
You also might consider offering “voluntary” benefits, including consumer goods purchasing services, life insurance, disability insurance, and pet insurance. Employees pay for these benefits; although, they might be payroll-deducted. By negotiating with vendors, employers may be able to provide these programs to employees on a more economical basis than via traditional sales channels.
Optimizing Your EVP
When evaluating EVP, the goal is to make your company’s compensation package as attractive as possible — without breaking the bank. By surveying workers, you can help determine which monetary, intangible, and noncash components they value the most and identify gaps in your offerings. Sometimes, small changes can reap major payoffs when it comes to attracting and retaining workers in a tight labor market.
You can’t bolster your EVP overnight. But the sooner you discover the cost-effective benefits that your employees value, the sooner you may be able to assemble a skilled, motivated, and productive workforce to thrive as the economy moves forward.
CFOs Disclose Top Concerns and Employment Outlook
The CFO Survey is a collaboration of Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. This quarterly publication tracks CFO optimism and top concerns. In the first quarter of 2021, the survey reports that the top five pressing concerns include the following:
1. Demand, sales, and revenue
2. Labor quality and availability
3. Tax policy
4. Cost pressure and inflation
5. Overall health of the economy
On average, survey respondents expect their firms to increase full-time employment by 5.5% from the first quarter of 2021 over the same period last year. In the fourth quarter of 2020, the average expected year-over-year increase in employment was only 0.7%. Looking ahead, firms expect year-over-year employment to increase by 3.7% for the first quarter of 2022. However, those expectations may not be achieved unless changes are made in the labor supply situation.
© Copyright 2021 Thomson Reuters.
Disclaimer of Liability
Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.