Enhancing total compensation with alternative benefits
No industry is immune to the competitive employment market we are experiencing. Nearly every organization, regardless of size or location, is struggling to hire and hold on to employees right now.
With a limited supply of potential employees, organizations in the private and public sectors are pursuing the same candidates. On top of that, competitors are trying to lure away your current employees. Unfortunately for the public sector, private sector businesses can typically offer better salaries. That means it comes down to the benefit package, and this is where public sector organizations, if they are creative, have an opportunity to compete their private sector counterparts.
Recently, Mercer released the findings of its survey report on health and benefit strategies for 2023, in which it said, “Compensation alone doesn’t build the kind of engagement and sense of belonging that a well-designed benefit program can.” According to the survey, employers are looking to foster a stronger bond with their workforce by offering benefits and resources “their employees will value,” with 70% of all large employers planning to enhance their benefits in 2023 to improve attraction and retention, or “better meet employee needs.”
To do that, employers need to understand what is important to most of their employees. An employee engagement survey is a good way to start that conversation, but organizations can also conduct a needs analysis or use focus groups.
Regardless, the Mercer study revealed five leading trends were:
The trend regarding flexibility is overwhelmingly the benefit most organizations are focusing on in the next year or so. Although it seems employers are pushing for people to come back to the office, 78% are offering or planning to offer employees the option to work from home regularly, but not necessarily every day, with only 9% saying they would do that. In that vein, 66% of respondents are considering flexible work schedules, like offering flex time during the day or a four-day workweek.
Some local governments are resistant to the idea. Unfortunately, this is not a trend that is going away. According to the third edition of McKinsey’s American Opportunity Survey, 87% of respondents would take the opportunity to work remotely if they could. Furthermore, a good number of workers, especially younger ones, are even willing to take a pay cut to have flexibility in their workweeks.
When it comes to family-friendly benefits, offerings are expanding beyond the commonplace (e.g., parental leave and on-site lactation rooms) to such benefits as adoption assistance, financial support for fertility treatment, on-site child care and backup elder care. In fact, more than one-third responded that they will offer or plan to offer caregiver referrals or consultations regarding elder care.
Improving access to behavioral healthcare was one of the top trends in this survey; however, it ranked first in Mercer’s 2022 annual health benefits survey. With that in mind, it is no surprise 67% of respondents have strategies in place or are planning to provide enhanced employee assistance program (EAP) services in 2023, and 62% will provide additional related online resources, including apps, articles and classes.
A typical retention challenge is parents who leave the workforce after having children. To help stem the tide, 37% of organizations offer or are planning to offer “at least one specialized benefit or resource to support reproductive health,” from family planning through menopausal support.
The last trend, which is also the hardest to define, covers a wide range. The most popular among these types of benefits is tuition reimbursement, with 75% of organizations offering or planning to offer it in 2023. Behind that, 63% will give employees the option of supplemental life or individual disability insurance.
Among all of these trends are unusual offerings which could help differentiate public sector organizations from others. Paid volunteer leave, which 45% of respondents said they will be offering or plan to, is something that shouldn’t cost an organization too much, even if a temp is needed to cover that employee’s job for the day.
Like a lot of perks, the ones that will make an impression may require a level of financial investment. Though it may not be an enormous amount, such as the costs of providing a mental health app or an identity protection program, it could be necessary to significantly increase the budget in order to offer things like a sabbatical, on-site or discounted child care, local or on-site fitness center memberships or subsidized meals.
Certain local governments have already gotten resourceful with their benefits, enhancing total compensation with stipends for housing or rent-to-own options for city- or town-owned homes. On a smaller scale, there are organizations that offer allowances for setting up a home office and free or reduced fees for using local transit. Another unconventional benefit that some municipalities are able to offer is free or discounted park department programs.
Since any new benefits could be pricey, a cost-benefit analysis may be a helpful way to see what the long-term financial impact will be to the organization.
It is important to note that public sector organizations sometimes have functions that don’t have equivalents in the private sector, where something like working from home would not be possible for that role. Still, even though not every benefit will work for every position, it does not mean it is not worth offering for certain jobs. Organizations may need to have a remote work option to be competitive for some of the more in-demand roles. For example, an organization in a smaller or less accessible location will have a more modest pool of qualified candidates and may need to pursue someone outside its immediate area.
As baby boomers continue to retire, the challenges of finding suitable employees are not going to get any easier. Alternative benefits are one way to increase total compensation offerings, but only if they are meaningful to the types of employees the organization wants to attract and retain. Conducting an employee engagement assessment can evaluate employees’ level of engagement, giving employers a candid view into what their workforce likes, dislikes or wishes the organization offered. The information gathered provides valuable feedback the organization can use to benchmark against industry standards. Nonetheless, the data is only effective if the organization learns from it, particularly by addressing areas of improvement. Because if an employer doesn’t understand the needs of its employees, it won’t matter what benefits the organization has to offer.
