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Why You Should Give Benefits to Your Hourly Employees

Merlin Blog / Employers  / Why You Should Give Benefits to Your Hourly Employees
Why you should give benefits to your hourly employees

Why You Should Give Benefits to Your Hourly Employees

If you employ hourly workers for your business, chances are employee turnover is an issue for you. Employee turnover is worse in certain industries than others. Restaurants, for example, experience turnover rates of more than 70% each year. According to the U.S. Department of Labor, hourly employees have, on average, a turnover rate four times higher than their salaried counterparts. If left unchecked, high turnover can demoralize your workforce and cut into your bottom line.

One of the main reasons hourly employees hop around so much is because their skills are transferable to many other similar jobs on the market. This means if a competitor is hiring for a position that you’re employing someone for, and they offer 50 cents or a dollar more per hour, chances are your employee will jump ship for the pay raise. You can increase your wages to be equal to or more than your competitors but you can only compete on price to a certain extent. So how can you improve your employee retention?

One of the best ways to improve employee retention is by providing your employees with benefits. If you think it sounds unfeasible to provide your employees with benefits, consider the costs.


The High Cost of Employee Turnover

The cost of replacing an hourly employee varies by industry. Employee replacement cost estimates vary from a third to half of the employee’s annual salary. This means it can cost anywhere between $5,000 to $8,000 to replace an $8/hour employee. The reason the cost of replacing an employee sounds so high is because it is. In addition to the expense of hiring and training, you’re also paying for lost productivity and sales. Which means, high turnover can cause a significant dent in your profits.


The Costco Effect

Many companies achieve lower than average turnover rates by providing their employees with benefits. For example, Costco, which pays one of the highest hourly wages in the industry, also provides most of their employees with health insurance coverage. While Costco spends more on employee benefits than their competitors, they also enjoy one of the most loyal and productive workforces in retail, with an average turnover rate of 17%.

Contrast this to competitor Walmart, which pays its employees significantly lower wages and offers fewer health and retirement benefits and coverage. Is it any surprise that the company’s turnover is 44%?

Dorothy Lane Market, a chain of gourmet grocery stores based in Dayton, OH, provides all of its employees with health insurance. The company also contributes 50% towards their employees’ local gym memberships. As a result, Dorothy Lane has an average employee turnover rate of 30%, compared to the close to 100% industry average.


Give and Gain Appreciation

No employee wants to feel like they are unappreciated or undervalued in the workplace. In order to cultivate an environment of trust and loyalty that goes both ways, management needs to ensure employees feel respected and heard. It’s not surprising that a common reason people leave their jobs is that they don’t feel respected by the company’s culture, especially when it comes to fair compensation, benefits and perks.

Which suggests providing benefits can be a powerful and effective tool to reassure your team knows that you respect them and appreciate their contribution to the workplace.


Healthier Employees

Millions of employees don’t get paid time off when they’re sick — and even those who do, rarely take advantage of it. In fact, in 2015, only about 16% of the workforce used all of their sick days. This doesn’t mean that people are no longer getting sick — far from it.

Rather, they feel pressured to show up no matter what — even if that means getting their co-workers sick or being less productive at work. Presenteeism, which describes when employees come to work sick and underperform their work, has been estimated to cost $150 billion in lost productivity every year.

Offering benefits, particularly sick day and health benefits, to your employees will prevent this lost productivity, and incentivize your employees to fully recover before they come back to work. They’ll be less stressed, happier, and ready to perform.


Happier, Productive Environment

Google and Facebook are regularly touted as companies focused on boosting employee wellbeing and morale through excellent benefits and perks, such as: stock options, catered meals and unlimited vacation. And they work, too. These companies are regularly listed among the most desirable companies to work for.

Offering top-tier benefits shows employees how much they are valued, resulting in happier employees who are motivated to continue improving.


Types of Benefits and Perks

Depending on your business budget, you may not be able to provide the same caliber of benefits or perks touted by top tech companies, but you can evaluate your existing benefits package and see where there is room for improvement.

High Cost

  • Health Insurance: Offer a variety of plans at different price points for employees.
  • Paid Sick Days: Set a designated number of days per year.
  • Paid Vacation Days: Set to accrue or provide a flat number of days per year. Or if you’re feeling extra generous, implement an unlimited Paid Time Off policy.
  • 401K Match: Match employee contributions up to a certain percentage.

Low Cost

  • Flexible Schedules: Allow employees to shift their schedule to accommodate rush hour or personal schedules.
  • Work From Home: Schedule remote working hours if your employees do not need to be in the office all the time.
  • Event Tickets: Offer complimentary or discounted tickets to movie theaters, sports games, concerts or amusement parks for stellar performance.
  • Gym Membership or Wellness Program: Provide gym membership subsidies or set up a health and wellness program at work where you provide free flu shots and yoga classes.
  • Meals, Snacks and Drinks: Stock your fridge and pantries with healthy snacks and drinks for your staff. Consider catering meals once a week or to celebrate milestones.
  • Commuting Assistance: Cover commuting expenses and offer reimbursements for travel.
  • Tuition Help: Pay tuition for higher learning or education related to an employee’s professional growth.
  • Birthdays Off: Give employees a paid holiday on their birthday.


The bottom line

If you’re not sure what kinds of benefits to offer, survey your employees to find out which benefits they care about most.

Chances are your long term savings from lower turnover will outweigh your expenses from providing employee benefits. While providing benefits may cost you in the short run, your employees will reward you by staying with you for longer. Let us help you hire the candidates you need today!


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