Attracting, Retaining Workers Among Top Worries for Small Businesses

While many small and mid-sized businesses are showing financial improvement compared to last year, shifting geopolitical issues, interest rate hikes, and continued recruitment challenges are raising concerns about ongoing impacts, especially inflation and employee retention, according to the Principal Financial Group.

The latest Principal Financial Well-Being Index noted that 68% of businesses report financial improvement compared to this time last year. While employers and employees rated inflation as their number one concern, businesses also are feeling pressured to increase wages and benefits to attract and retain employees. Employees voiced concern about mental health and well-being and finding a new job with better pay.

The Hunt for Employees

Amid this increased competition for talent, businesses are focused heavily on growing their number of employees. Compared to this time last year, significantly more businesses are increasing their number of employees, with 53% adding staff, compared to 32% in March 2021, according to the survey. And on average, 36% of open positions at a company are new positions.

Looking closer at job vacancy levels, small businesses are faring better than their larger counterparts, which are experiencing greater job vacancy levels today. Just 28% of employers with fewer than 500 employees report higher job vacancy levels. For companies with more than 500 employees, however, 43% report higher job vacancy levels.

Companies are taking steps to attract new employees, the survey noted. Nearly half (49%) of businesses are offering flexible work schedules while 40% have increased wages for the majority or all of their employees. Over half of the employees surveyed reported receiving a wage increase during the past year. The most common amount was a 3% increase.

Benefits Are Key 

The role of employee benefits is becoming more apparent, with 37% of employers noting that they’re increasing the quality of benefits they offer to help with employee recruitment, according to the survey.

Employers are prioritizing specific benefits like caregiving support, vacation time, and pet insurance, which all rose to the top of the list of benefits employers are offering to attract new employees. Among the employees surveyed, those who were less likely to have benefits such as retirement, vacation time, and dental and vision insurance in their current role, were more interested in leaving their job.

As businesses contend with the shifting labor force, improving the employee experience is key for retention, the survey said. When asked about benefits businesses are increasing to improve employee satisfaction and wellbeing, employers identified the following:

• Disability insurance (short or long term)
• Vacation time
• Mental health and well-being programs as the top three.

Employees with greater job satisfaction are more likely to have access to financial wellness, training and educational opportunities, as well as caregiving benefits.

Why Benefits Matter

There are many reasons employee benefits are becoming so important in attracting and retaining employees, explained Kara Hoogensen, senior vice president for specialty benefits at Principal. Both non-traditional perks and more traditional benefit offerings (like life insurance and retirement solutions), contribute to a holistic employee benefits program, she said, which is critical to retaining and attracting top talent in today’s tight labor environment.

“A competitive retirement-benefits package, and other financial wellness benefits, are especially crucial in helping employees manage not only day-to-day finances but also plan for the future,” said Hoogensen. “These types of benefits significantly increase employees’ long-term financial security. And that feeling of financial security can contribute to more engaged and productive employees.”

Hoogensen added that according to the Principal Financial Well-Being Index, the top three benefits employers expect to increase are training and education, health care benefits and retirement. “Investing in employees’ education shows that businesses care about their future goals, and helps them envision growth opportunities within the organization, contributing to increased retention,” she said.

Retirement Tops Reasons To Leave

Retirement was among the key drivers of staff leaving, according to business leaders surveyed. Businesses reported a 16% decrease in staff in the past three months, led by 27% of employees leaving because of retirement. Staff losses from retirement may not last, however, as people face rising costs and potential losses in savings due to inflation and recent market volatility.

Holding on to Employees

So, what can employers do to hold on to their employees in this highly competitive market? As businesses are dealing with the complex labor shortage and an empowered workforce with increasing demands, benefit offerings are a critical component, suggested Hoogensen.  “Aside from higher wages, employees want to work somewhere they feel valued, and tailoring benefits to employees’ needs is key in retaining talent,” Hoogensen said.  “For example,” she added, “if you have a number of younger employees who may be growing their families in the coming years, you might choose to offer short-term disability and/or caregiving support as employees balance work and home life.”

The Principal Financial Well-Being Index surveys business owners, decision-makers and business leaders aged 21 and over who work at companies with 2 – 10,000 employees. The nationwide survey, commissioned since 2012, examines the financial well-being of American workers and business employers.

Ayo Mseka has more than 30 years of experience reporting on the financial-services industry. She formerly served as Editor-In-Chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].

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Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].