Home
| Register/Subscribe Home |
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | SEPTEMBER 10, 2001 STAFF & BENEFITS Weigh the Benefits Don't be fooled by the latest uptick in unemployment. A labor shortage is looming, so entrepreneurs need to polish the perks they offer
They acknowledge, however, that the easy pickings in the labor pool won't last once the economy recovers and corporations start hiring again. The head-counters agree: Employers are facing a workforce shortfall of 5 million by 2006, according to the Bureau of Labor Statistics. The biggest reason is the small size of Generations X and Y (today's youngest workers) vs. the Baby Boom generation, which will be retiring in large numbers over the next two decades. "The shifting balance of power between employees and employers will continue," predicts Dave Patel, manager for workplace trends and forecasting at the Society of Human Resources Management in Alexandria, Va. "Employers need workers more than workers need them." LURING APPLICANTS. In the face of this shortfall, a company's ability to hire will hinge on just how far it is prepared to give workers what they want, according to compensation-and-benefits experts. What workers want isn't quite so simple as it used to be, when employment for life -- with comprehensive health care and a company pension -- was the norm. Those one-size-fits-all benefits packages are gradually being replaced by the pick-your-own variety. The savviest companies, say human-resources experts, are taking advantage of the lull in the hiring frenzy to redesign their packages to get the most benefits for the buck. To know what to offer, think about who you're trying to attract. As a general rule, the single and childless twentysomething employee is much more interested in a bigger pay check or extra time off than in the availability of parental leave or life insurance. "You're going to have to spend the benefits dollars differently," says Patel. "You might not have to spend more, necessarily. The keys will be flexibility and equitability." Overall, employers are not spending more on benefits than they were 14 years ago. In March, 1987, for example, benefits accounted for 26.8% of total compensation. That figure remained largely unchanged, 27.1%, in March 2001, according to the nonprofit Employee Benefits Research Institute in Washington, D.C. INDIVIDUAL PRIORITIES. Benefits consultant Gary Kushner, of Kushner and Co. in Kalamazoo, Mich., knows of a "very astute" small employer who added a lot of flexibility without cost by setting up a time-off bank. Each employee's allotment of personal days, sick days, vacation days, and holidays goes into his or her account, to be "spent" whenever appropriate. "Defined-benefit pension plans are not real key to those 22-year-olds," says Kushner of the company, which was recruiting young college graduates. "To them, adds Kushner, "time off is a real benefit." It's becoming common, he says, for employers to earmark a certain dollar amount (a percentage of pay) for each employee to decide how to spend it. The priority that an employee places on his retirement contribution, leave of absence, adoption assistance, a low medical deductible, and dozens of other potential benefits depends upon age and family circumstance, surveys show. It's more work to set up such flexible benefits systems, "but they can be powerful retention-and-attraction tools," Kushner says. The average small-business owner thinks it is impossible to offer such flexibility, he says, adding that sometimes insurers will argue that it's too complicated for a small company. In reality, though, "there is very little out there the small business can't do," says Kushner, who adds that, for the moment, "they're lagging." BIG VS. SMALL That lag shows up in benefits surveys, including the latest one by the Society for Human Resources Management, taken in spring 2001, and the Bureau of Labor Statistics. Companies with fewer than 100 employees are less likely to offer medical benefits (67% vs. 97% for all employers) and also less likely to provide a retirement plan (46% vs. 79%), a health-care flexible spending account (56% vs. 69%), and a dependent-care flexible spending account (55% vs. 69%). An employee's chances of enjoying flextime, telecommuting, and the ability to bring a child to work in an emergency are, however, greater at small companies than larger ones. The surveys show that benefits are becoming more numerous at companies of all sizes, a trend attributed to the tight labor market and the relatively good economy during most of the last decade. That doesn't mean it has been easy to keep up. Many small businesses are seeing double-digit increases in the cost of health insurance. "The No. 1 priority problem for us has shifted from taxes and government regulation to the cost of health insurance," says Patrick Ryan, head of the small-business committee of the New Jersey Business and Industry Assn. "Premiums in this state have been skyrocketing, and businesses have been sucking it up because you've got to keep the employees." TIME IS TIGHT. The state's small-business owners just got a break in the form of a new law, effective in February, 2002, that will permit small businesses with two to 50 employees to band together to buy health insurance, allowing them to increase the risk pool and thus lower their costs. Right now, the smallest companies (those with fewer than 20 workers) are paying an average of $500 more per employee than are larger companies, says Chris Biddle, vice-president of the New Jersey Business & Industry Assn. Recent policy changes at the federal level will also cut the cost of benefits for some employers. Tax rules on employer-provided educational assistance and medical-savings accounts are more liberal, and the contribution limits have been raised for simple retirement accounts, which are designed specifically for small employers. Some small-business owners are likely to think they don't have time to keep up with the legal changes affecting benefits, to comparison-shop for the best benefits deals, and to poll employees about their preferences. But they have no choice if they want to be competitive, says Patel, who nonetheless is sympathetic. "It is daunting," he says. Perhaps not as daunting, though, as that projected 5 million shortfall in the labor pool.  By Theresa Forsman in New York Edited by Robin J. Phillips Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | SEPTEMBER |
 Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Policy |
Printer-Friendly Version
