Labor Shortage: Unlock Solutions by Evaluating Your Employment Value Proposition
In normal market conditions, people who've been unemployed due to an economic slump are generally eager to take 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.
Here's an overview of what's happening 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 including:
- 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 are actively seeking 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 are available.
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; so, other states might follow Montana's lead without dipping into their own coffers.
- Creative Solutions
- 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:
- Signing bonuses,
- Stay-bonuses (awarded to employees who stick around for a prescribed period), and
- 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, isn't always at the top of 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'll 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, and
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'll do your best to provide jobs with more responsibility and pay whenever possible, they'll 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.
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:
- Demand, sales and revenue,
- Labor quality and availability,
- Tax policy,
- Cost pressure and inflation, and
- 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.
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.