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Targeting Employee Benefits

Businesses are offering more benefits, such as backup child care and bigger 401(k) matches, to attract and retain employees amid the workforce shortage.

Targeting Employee Benefits

High employee turnover and a paucity of job applicants are among the challenges that Minnesota employers recently shared with the Federal Reserve Bank of Minneapolis.

Those labor trends, included in a July report from the regional Fed office, also were documented in August by the Minnesota Department of Employment and Economic Development (DEED).

“Minnesota’s unemployment rate remains low, and the labor force participation rate remains high,” DEED Commissioner Steve Grove says in a statement. “This continues to suggest that the state’s labor force is at or near capacity, and businesses will continue to find it challenging to hire and retain workers.”

With an unemployment rate of 3.4 percent and a labor force participation rate of 70 percent, what can Minnesota employers do to find the workers they need?

One major response: Be more creative about the benefits they’re offering. Companies are introducing new benefits, expanding the definition of employee benefits, and giving workers more choices to customize their benefit packages.

“Given that the competition for talent is so steep, doing things differently and differentiating your organization is the name of the game,” says Deborah Schultz, director of the Total Rewards division of MRA, a Midwest employers’ organization that provides human resources and other services.

No longer is a benefits package just a standard perk to go with a salary. Today’s companies are providing benefits that go well beyond health care to secure key talent.

Advances in the traditional health care benefit space are still unfolding. For example, companies are offering more options for employee health care plans to cater to different employee needs and budgets. In addition to general health and dental coverage, some companies, including Bloomington–based salon giant Great Clips, Inc., are adding vision plans.

Businesses also are taking steps to help employees access mental health services. Some companies are providing on-site counseling. Richfield–based retailer Best Buy is training supervisors to recognize possible warning signs of mental health concerns in employees. Best Buy also has launched a campaign to erase the stigma of mental health difficulties.

Compared with benefit packages from several years ago, benefits from today’s employers address multiple needs, such as life stressors in employees’ personal lives, which can affect work performance. Consequently, companies are doing more to help workers address financial challenges, care for family members, and juggle work-life scheduling.

“The competition for talent is so steep ... differentiating your organization is the name of the game.” —Deborah Schultz, MRA director of Total Rewards

Valuable education benefits

Education costs are the source of considerable financial stress. To attract and retain educated employees, businesses are sharing the cost of training and education. For example, some companies offer advanced degree funding or other professional development support, which allows people to move up within their companies. Young workers often are carrying major student debt, so some businesses are providing student loan payment assistance or refinancing options.

Best Buy, Great Clips, and Monticello–based manufacturer Ultra Machining Co. (UMC) offer tuition reimbursement or assistance; some businesses are extending an education benefit to include spouses or children.

That’s what UMC did with scholarships. Under its program, UMC offers annual scholarships to employees’ children and grandchildren age 24 and younger. A maximum of 10 recipients per year each receive a scholarship of up to $500. They’re chosen based on academic achievements and demonstrated leadership, among other criteria.

“We are a second-generation family-owned business, so we really felt it was important to continue to maintain that connection with our employees’ children,” says Jaci Dukowitz, UMC’s chief operating officer. She says the business places a premium on the program “to continue to foster good educational investments and make sure we’re looking out for [employees’] families.”

Such personal-benefit programs help attract employees, even if UMC can’t compete on salary with bigger companies, Dukowitz says. The program also helps with retention, she emphasizes; the company had a turnover rate of about 10 percent in 2018, which, she says, is “wonderful in this environment and in manufacturing.”

“The competition for talent is so steep ... differentiating your organization is the name of the game.” —Deborah Schultz, MRA director of Total Rewards

Time and money

UMC shares profits with its employees, and companies that operate similar profit-sharing programs, including Delta Air Lines, have an advantage in competing for workers.

Alan Benson, assistant professor in the Department of Work and Organizations at the University of Minnesota’s Carlson School of Management, says employees also care deeply about retirement benefits.

Businesses routinely offer 401(k) plans, which in many cases have replaced defined benefit plans (when companies pay a guaranteed retirement benefit based on employee pay and years of service).

“That [guaranteed retirement benefit] turns out to be really expensive,” Benson says. “Employers are going to try to structure their benefits package to get the most bang for their buck.” Some companies have increased their 401(k) match ceilings, Schultz says, while others have opened up 401(k) benefits to seasonal employees and contract workers.

Beyond providing new financial benefits, some businesses are helping their employees save time and avoid hassles. Such is the case with a benefit that Great Clips added last year: identity theft protection.

“This is actually an idea I brought to the company because I had it through my spouse’s former company,” says Jared Nypen, vice president of talent at Great Clips. “When that went away and I went to try to find my own identity theft protection, it was really expensive. So being able to offer that for Great Clips employees just made a lot of sense to me.”

Great Clips is considering the addition of pet insurance to its benefit offerings, which Schultz says also would save some money for its employees.

Schultz labels these “concierge” benefits, or offerings that extend convenience to employees by giving them one fewer thing to manage themselves.

Colleen Flaherty Manchester, Benson’s colleague at the Carlson School of Management, adds that removing items from employees’ to-do lists benefits both the company and its workers.

Firms offer certain benefits to enhance employee productivity, says Manchester, an associate professor. “If there is financial stress that’s taking away from [someone’s] ability to focus on the job, then what can the employer do to mitigate that?” If someone has a good health care plan through their employer, they aren’t worrying about paying medical bills when they should be concentrating on their work.

All in the family

Another source of stress that employers are seeking to alleviate is the care of employees’ family members—children, elders, or employees themselves.

Last year, Best Buy introduced backup child care. Through the care@work program with Care.com, employees can use the benefit up to 10 days a year, at a $10 per day co-pay, for emergency child care during work hours.

Minneapolis–based law firm Fredrikson & Byron P.A. has offered backup child care through the company Bright Horizons for a few years, says Leigh-Erin Irons, an attorney with the firm.

Target announced its version of a backup care offering earlier this year: 20 days a year for child care or elder care. On top of that, Target introduced paid family leave—days that are supplemental to standard sick and vacation days, which an employee can use to care for a partner, child, or parent.

Best Buy also complements backup child care with what it calls paid caregiver leave.

“Whether it’s an employee caring for their children or their parents, the definition of a loved one is really broad here,” says Charles Montreuil, senior vice president of human resources at Best Buy. “And to be able to take care of loved ones at a critical time has become an incredible part of our portfolio.”

In August, Best Buy introduced a surrogacy benefit. Best Buy will provide up to $14,080 in financial support to help cover expenses incurred by intended parents, including fees, screening costs, and travel.

Also for the sake of families, companies are expanding the traditional benefit of parental leave. Fathers are getting more—or in some cases, their first-ever—time off; mothers are eligible for paid time off instead of unpaid leave and more time away overall.

According to the Families and Work Institute’s 2016 National Study of Employers, only 10 percent of recorded U.S. companies were offering fully paid maternity leave. The Family Medical Leave Act, passed in 1993, calls for 12 weeks of unpaid leave only for the primary caretaker of a newborn.

In contrast, Fredrikson & Byron offers 16 weeks of paid leave for birth parents and 10 weeks of paid leave for nonbirth/adoptive parents, Irons says. “We’re listening to the market in terms of what we might do to help make employees’ work and family obligations integrate,” she adds.

Fun and fitness

The focus on work-life integration extends beyond the scope of family. Employees want to have a life outside of work, and they want to stay fit.

Since time for physical fitness can be hard to schedule around long work days, companies have brought work and fitness together. In some cases, Schultz notes, this means introducing on-site fitness centers, self-defense classes, health club memberships or discounts, and more. Nypen says Great Clips offers on-site yoga and sculpt and burn classes. Hillary Feder, an employee engagement expert who founded the consulting firm Ask Hillary’s, creates fitness competitions and other programs for companies.

When it comes to life outside of work, it’s about giving employees time to live life.

In fact, Montreuil says when Best Buy conducted a survey of its employees in 2018, half of the 7,000 open-ended question responses were about more time off. In response to the survey, Best Buy now gives part-time employees 16 hours of paid time off annually.

Fredrikson & Byron creates work-life flexibility by allowing attorneys to work reduced hours. Irons says 51 percent of the firm’s attorneys take advantage of it, whether to care for family or to pursue nonwork interests.

Benefits reflect culture

As the portfolio of benefits has evolved, so has the importance of benefit packages, which are seen as valuable resources for attracting and retaining employees. Benson says they’re even gaining ground on salary in terms of share of overall compensation. What’s more, employers are beginning to choose the benefits they offer based on the company culture they want to support and the people they want to hire.

As Feder says, it’s about the company’s brand.

“Your brand is who you are, what you stand for, how you go about doing business, your values,” Feder says.

Family-friendly policies attract a certain kind of employee; education benefits often entice people who value learning. Those who want to save money may place a premium on companies that provide high 401(k) matches, while companies that offer paid time off for volunteering attract altruistic people.

“It’s knowing your workforce, knowing the people and skills you’re looking to attract and taking those into consideration as you’re making those decisions [on benefits packages],” Schultz says.

The new holistic and culture-minded approach to benefits stems from a technology-driven change in the work environment, and from an increasingly diverse workforce—across generations, gender, ethnicity, and other characteristics.

People are working more collaboratively, Feder says. The idea of work culture is relatively new, and with the introduction of computers, human roles are now more knowledge-based. Feder says this means humans, rather than tools and equipment, are a company’s most important and hard-to-replace asset.

“So what are you doing to take care of them? What are you doing to make work engaging, make it inviting, to build camaraderie?” Feder says. “So much has changed. You need to change how you do things to keep people engaged, [so employees] want to be at your company.”

What it takes to keep people motivated now is partly based on the values of the new workforce. Whether these values, like work-life flexibility and social consciousness, stem from the desires of a new generation of workers or other new workforce participants, they are becoming the norm for the entire labor market, Feder says. When the last of the traditionalists of the older workforce exit, the universality of the holistic benefits approach will firmly take hold, she believes.

Simultaneously, other circumstances that have contributed to this evolution in benefits also remain, including economic pressures.

The U of M’s Manchester cites growing student debt as a factor in companies creating education support benefits, including subsidies to retire student loans.

“It’s definitely based on circumstances,” Manchester says. “You see this ebb and flow with the interaction of the tight labor market. If the labor market was flat, you probably wouldn’t see this much innovation in the benefit space.”

The relationship between employers and employees has become less transactional. “I think employers are trying to move the needle on bringing your whole self to work,” Manchester says, “whether that’s validating you as a pet owner or validating you as someone who has dependent-care responsibilities.”

There is still room for changes in the benefits space, she notes, and the innovations that have come out of today’s circumstances might well stick around.

Nypen says that’s the case at Great Clips.

“If the labor market gets less tight, we’re certainly not going to take benefits away, because we care deeply about our employees,” Nypen says. “How we structure benefits is definitely important to our strategy and how we get our share of talent. We would be doing what’s best for our employees.”

Amanda Ostuni is the digital associate editor of Twin Cities Business.

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