Last week, the Bureau of Labor Statistics (BLS) released October’s ‘Employment Situation’ report. Highlights of the report show:
- Unemployment remains at a historic low of 3.7%
- Wages are up 3.1% year-over-year, which is the highest it’s been in over 10 years
- Job growth continues to trend upwards, as non-farm payroll increased by 250,000
Additionally, the BLS’ Employment Cost report shows that benefit costs rose .4% since June and 1.9% year-over-year
As the job opportunities continue to grow, and the labor pool continues to shrink, wages are expected to continue trending up as a way to attract and retain top talent. At a more granular level, employers should consider the following implications and observations of a changing workforce in order to stay competitive.
Competition in Rising Wage Market
The broad market increase in wages doesn’t mean that every company can afford to pay it.
For example, we recently sat down with the HR director at 21C to talk about ways their hotels and museums deal with a tight labor market. In our conversation, Area Director of Human Resources, Andrew Lotter, told us that one of their largest competitors is Amazon because they offer more than two dollars an hour higher than 21C can for employees with comparable skill sets, making it even more difficult for 21C to compete in an already small pool of talent.
Companies still need to find a way to be compelling to candidates, nonetheless.
As a way to stay competitive, 21C began offering their employees DailyPay. If they can’t increase wages to compete with corporations like Amazon, they can at least give their employees control over the timing of the pay.
Let’s say you are a company who IS or HAS raised wages. Well, now what?? Unless you raise your prices, margins by definition are going down, which means profits are going down. You have to make up for the additional expense in wages somewhere.
The best way to “claw back” the additional expense of increased wages is by reducing your turnover expense.
Offering strategic benefits to reduce turnover and improve employee engagement can help pare down on the cost of turnover. For example, our data shows:
- Employees would take a 13% reduction in pay if there were to receive DailyPay
- Our partners experience an average reduction in turnover of 41%
- Employees are 1.9x more likely to apply for daily pay job than weekly
Considering Financially Unwell Employees
Regardless of measures that have been taken to attract and retain talent by way of wage increases, an annual “Financial Health Pulse” study conducted by Center for Financial Services Innovation found that only 28% of American households are financially healthy.
The study defines financial health as the ability to:
- Control spending
- Save money
- Minimize debt
- Plan for a financial future
Additionally, 55% of study participants say they are financially coping, which means that while they may experience occasional financial hardships, for the most part, they are doing OK. Another 17%, are classified as financially vulnerable, which means they are struggling in most aspects of their financial life:
- 45% of Americans said they don’t have enough savings to cover three months of expenses
- 26% said they don’t have enough for a single month
- 30% said they have more debt than they can manage
- 16% said they have delayed seeking medical care because of debt
- 17% said they don’t plan ahead financially
As the job market tightens and wages grow, employers should zero in on financial wellness for their employees to differentiate from the competition, and build trust and loyalty within their organizations.
Observe Shrinking, Untapped Recruiting Pools
When we talk about a tight labor market, we are often addressing Americans currently participating in the workforce. We’ve been battling the pressures to compete within an active candidate pool, but the most recent jobs report by the BLS indicates that the tight labor market may be spilling over into another category of workers.
The segment of U.S. workers who are not participating in the workforce because they are “discouraged” and those who work part-time jobs for economic reasons, also had a slight decline in their unemployment rates. These demographics are currently sitting at a 7.4% unemployment rate compared to 7.5% last month, and 7.6% at this time last year.
Implement Strategic Benefits
With both wages rising and a 1.9% rise in benefit costs over the last 12-months, employers must find ways to satisfy the demands for benefits and wage increases, while still protecting their bottom line.
Benefits account for roughly 30% of an employee’s total compensation.
Larger employers often thrive in this environment as they are more apt to provide competitive wages and strong benefits. This means that companies that aren’t the Amazons or Googles of the world need to seek cost-effective and strategic benefits that can help during the recurring and retention process.
That’s why companies like Vera Wang, The Maids, Ceridian, and 21C are beginning to offer a daily payment benefit to their employees. According to a study Paychex conducted in October, 10% of payroll professionals believe adding a daily pay option to their suite of benefits is a top five priority for 2018.
DailyPay is a benefit that employers can offer at no cost, and can round out a comprehensive benefits package, nicely.
In a tight labor market with growing wage and benefit expectations, employers must consider all options for attracting and retaining employees. DailyPay is an industry disruptor. Providing your employees the ability to tap into their earned but unpaid wages is a benefit that is proven to reduce turnover and improve recruiting practices.