My small business owner clients often reflect that it is getting more and more difficult to retain employees at competitive wages. Well, there is good reason for that feeling.
- Unemployment is at 3.3%, An Historic Low: The State of Washington reports that unemployment in the Seattle/Bellevue/Everett area is 3.3%, significantly lower than the national average of 3.7%. That means that employees likely have a lot of options on where to work and will take many things under consideration, such as benefits, transportation costs, commuting times, etc.
- Employee Personal Finances Are Pressured By +3-4% Annual Rising Cost of Living: The Bureau of Labor Statistics published December 2018 statistics that showed the Seattle Consumer Price Index for Urban Consumers (CPI-U) has risen 20.4% from December 2010 to December 2018. Strikingly, the December 2018 data showed the cost of living in Seattle has increased +6-7% since 2016! The primary driver to this increase is housing expense. One measure, the “owner’s equivalent rent”, was up +5.5% in 2018 alone. In addition, volatile gasoline prices rose +10.5% from a year ago, disproportionately affecting employees that need to drive far to get to work. Furthermore, service prices rose 3.2% from a year ago (after all, you need to pass through the higher costs of living). What this means is that in order to stay even, employees’ expectations for increases in net compensation are increasing by about 3-4% per year, which is significantly higher than the 2010-2016 period, where 1-2% annual increases were enough.
The Take Away
Generally, people don’t like changing jobs and only do so when they have a high level of dissatisfaction. Dissatisfaction often starts when employees feel like their employer doesn’t care. Just communicating that you understand their current situation may improve matters; however, showing you care will go a little farther.
I believe that one of the most tangible, cost effective ways an employer can demonstrate they care about their employees is through providing a company sponsored retirement plan, particularly if it has a match. In fact, a 2015 Glassdoor survey found that 4 out of 5 employees wanted additional benefits more than a pay raise.
Structuring a plan takes some time and thought. For instance, there are several ways to offer a plan which minimize costs to an employer, through using tax breaks and savings as well as shifting certain costs away from the plan sponsor, while still offering a world class plan.
Let me show you how in a quick 15-minute meeting. Just click this scheduling link and we can have a quick 15-minute conversation that may save you thousands of dollars in hiring costs and business disruptions.
Bureau of Labor Statistics. “Consumer Price Index, Seattle area – October 2018.” Available at: https://www.bls.gov/regions/west/news-release/consumerpriceindex_seattle.htm. Accessed Dec. 2018
“4 in 5 Employees Want Benefits or Perks More Than a Pay Raise”. Glassdoor, October 2, 2015. https://www.glassdoor.com/blog/ecs-q3-2015/