If you're like most of the owners and managers I know who are running a small or medium-sized business, you likely have a big headache: finding good people. In survey after survey, finding employees is among the top challenges facing business leaders. Anecdotally, most of my clients tell me the same. There are a few reasons for this: one of which is a lack of inventory.
By inventory, I mean available people — and there just aren’t enough people to fill open jobs. The economy is growing. The unemployment rate is low. Our population is aging. New generations of workers are reluctant to perform low-skill or manual jobs, and the employees that are willing to do this work are in short supply. Technologies are replacing workers in larger companies, but not fast — or affordably — enough for smaller businesses. This is why you may be struggling to find good people to work in your business — there’s a high demand and a short supply.
But there is a solution to this problem: you can pay your people more.
The most recent Paychex | IHS Markit Small Business Employment Watch found that small business employment growth actually declined slightly in March. Yet, the economy is expanding. Why? There are not enough employees to hire. More importantly, the good people out there are drawn to bigger companies that are likely paying more than smaller organizations.
The same Paychex study found that hourly earnings at small businesses only grew at an annual rate of 2.66 percent, a rate that is unchanged from the same annualized rate reported in the prior month. Is this the same at your business? If it is, then you and other employers across the country may be ignoring the most basic of economic principles: supply and demand. There's a big demand for people, yet a short supply of them. What happens to most products in this situation? Prices rise.
This hasn’t sunk in for many small business, but larger organizations recognize this. In fact, big companies are responding to this supply and demand problem in a natural way: they're paying more.
A recent report from consultancy firm PricewaterhouseCoopers, which surveyed hundreds of chief financial officers from larger, privately held companies, forecasted an annual wage growth of 4.27 percent in 2018. Other surveys have found that executives are planning 3 to 4 percent raises this year.
What else are larger organizations doing that smaller operations may not be considering? They’re using technology to help facilitate the recruiting and onboarding process (think posting jobs online, offering an online application process, letting employees fill out all that new-hire paperwork at their own pace and in the comfort of their own home, etc.). In fact, more than 95 percent of respondents in the 2017 Paychex Pulse of HR Survey said technology is effective for their onboarding, recruitment, performance management, and other administrative HR functions.
You may think that while it’s a great sentiment, this type of technology is for big budgets only. The reality is that there are solutions available today that help small and large organizations alike recruit the best fit and hard-to-find candidates, uncover important information about potential employees, and take some of the stress out of onboarding new hires. Not only can this streamline the process for your HR team, but it helps the business make a good first impression on new hires even before their first day.
Aside from offering higher salaries and embracing hiring technology, companies across the country are adding lucrative benefits to attract and retain the best workers. Many large companies offer generous healthcare options, retirement plans, and flexible work schedules and paid time off programs for their employees. But according to many reports, some are doing even more. Netflix, for example, offers unlimited — yes, unlimited — leave for new parents. Ikea also offers generous time off for new parents, even if they're a part-time employee. Starbucks provides tuition coverage for many of its employees. Facebook gives free housing to its interns. Google feeds its people round-the-clock for free. Airbnb's employees get free vacations. The list goes on.
Now, you may think that these are big tech companies and that these types of benefits aren't the norm, and you'd be right. But isn't that the point? You're competing for good people not only against the big companies offering generous benefits, but with local and regional competitors who — like you — probably aren't. But think about the difference you would make if you were! Think about the leg up you would have on your competition if you could offer even a portion of these benefits.
Here are some ideas:
- Offer paid time off for volunteer work. Survey after survey has shown that workers, especially millennials — those making up half of the workforce today — prefer to work for companies that are socially conscious. Consider offering a day or two off a year for employees who volunteer somewhere, and consider contributing to the charity of their choice.
- Help with student loans. Student debt is crushing so many workers nowadays. Can you help pay some of this down over their period of employment?
- Reimburse for higher education or training. You're not Starbucks, but can you contribute something toward an employee's college or skill-based training that could not only help them, but your business as well? Or could you make a commitment to pay for industry training at conferences and trade shows for your people?
- Update your PTO policy. Could your business allow a more creative paid time off policy? Instead of the traditional two weeks of vacation and five sick days, can you offer a lump sum of paid days off that can be used any way the employee wants?
- Reconsider offering a health insurance plan. In recent years, smaller companies may have scaled back on offering group health insurance coverage at all, given high health insurance premiums. But this is still very much a sought-after benefit that many employees have come to expect from their employer. This is why looking into options that can help you stay both competitive and within your budget can be to your advantage. For example, there are many consumer-driven health plans out there that meet the needs of smaller organizations.
In an era of short employment supply, you have to stand out from your competition. You don’t have to offer the many benefits that some big companies provide, but you can offer a variation of them. And don’t forget the power of technology — offering the same type of candidate and new-hire experience that a larger organization would can help make you competitive in the eyes of candidates and new hires.
Like others, you may push back because an investment in technology along with offering attractive benefits mean spending more money — money you don’t have. Perhaps it will. But are these really costs, or investments? Are your people any different than other assets in your company? You could successfully argue that they’re even more important and provide you with a greater return on investment. What will cost you even more is losing a good person to another company. Just remember: prices go up when supply is low and demand is high. If you're not willing to and invest in your recruiting efforts, then you may wind up going without.