Recruiting is increasingly becoming hard nowadays, and even after hiring employees, retaining them is becoming an even bigger challenge. So, what do employees value more, higher pay or better benefits?
A study shows that three million American employees quit their job looking for something better every month. Therefore, companies are actively looking for ways to step up the recruitment and retention of their workforce.
However, most employers are torn between increasing employee earnings and offering improved benefits. So, which works best in recruiting talents and keeping employees? Which is the better incentive for prospective and current employees?
This post discusses the pros and cons of both higher pay and better benefits to help you choose the best recruitment and retention strategy for your company.
Pros of Providing Higher Pay
1. Attracts Top Talent
Although higher pay alone might not be effective in attracting top talent, it has an influencing power. Even as employees search for companies with better benefits, most of them are also keen on salary; therefore, higher salary helps recruit high-level employees.
2. Gives High Output Levels
Giving higher pay sends a message to employees that you expect a higher level of output. When employees realize they are earning way above their counterparts in other companies, they are likely to put more effort. They work hard to prove that they deserve the pay and help your company achieve its goals.
3. Employees Retention
A well-compensated workforce is more likely to stay in a job for a longer time. Even job offers with stated salaries are not likely to lure them since they are already getting high pay. Higher employee retention means you won’t spend time resources in recruiting and hiring new employees.
Cons of Higher Pay
1. Reduced Business Revenue
Although higher pay can be effective in attracting top talent and retaining them, it impacts business revenue. It increases your business expenditures, and the higher compensations you give may not translate into more profits, especially in the short term.
Pros of Better Benefits
1. Attracts Top Talent
Improving your benefits package is a smart move when you want to hire top talents to help your company reach its goals. In fact, most businesses have realized the power of employee benefits in attracting well higher-level employees and are leaving nothing to chance.
Unlike in the past, where a fat check was enough for an employee to hop from one company to another, benefit programs are also a major deciding factor when choosing where to work today. Giving better benefits shows that you have the corporate goodwill to invest both in your business and workforce. This attracts high-level employees.
2. Reduces Employee Turnover
The battle does not end at hiring, but you also need to keep the employees. Benefits have a key role in retention since they cushion your workforce from being swayed by job offers from other companies. Employee turnover is expensive and can even lead to an employer doubling the salary to fill up the position, resulting in unexpected expenditure. Offering better benefits help reduce turnover, which saves your company expenses on hiring and training.
3. Tax Advancements
Offering benefits may give you an advantage of tax reduction. These tax deductions are available for benefits such as a 401k match, pension contributions, insurance options, and more. The tax advancement helps your employees to incur minimal taxes, thus improving their financial savings. This facilitates employee growth and also increases your company’s profits.
Cons of Better Benefits
1. It does not satisfy everyone.
Employees have different tastes, and benefits will not satisfy everyone. You could have the best and most competitive benefits in the region or industry, but still have some employees who are not satisfied with the package you offer. Therefore, the benefits could be there but fail to motivate some employees.
2. Fluctuating Costs
If you offer comprehensive health insurance benefits, keeping up with fluctuating costs could be a challenge. For example, there has been a rapid rise in the cost of health insurance which forces companies to either cut the benefits or pay more to maintain the package.
3. Legal Issues
Some benefits have a specific manner in which you can provide your employees. Your business might have to pay legal fees to verify that your benefits packages are as mandated by various business laws.
Besides, mistakes in giving the benefits could open doors for litigation. Employees may sue a company due to errors or failure to give promised benefits. All these legal issues might make giving employee benefits a delicate affair for companies.
1. Health Insurance
Even with the younger generations increasingly filling the workforce, a robust health insurance is recognized among the most popular of benefits packages for employees. Ensuring that your workforce has a comprehensive health insurance plan that covers deductible is essential. It is an assurance to employees that they don’t have to worry about injury or illness.
2. 401k & Retirement
A 401k retirement plan is another popular benefit in many companies. A competitive 401k match increases job satisfaction and makes your organization stand out amongst competitors. It makes the team feel that you value their financial future.
Out of box benefits are available in different forms, from eliminating stress in employees’ daily lives to self-development for better opportunities.
1. Paid Time-off
Paid time off is valuable to most employees. Employers encourage employees to take paid time off for covering child care needs, vacations, and even preventive wellness such as screenings.
2. Tuition Assistance
Considering the financial burden that employees who want to further their studies or those with college-bound children may face, employers are providing tuition assistance as a benefit. Relieving your employees from the stress of meeting the education costs through tuition reimbursement is a great package to see them want to keep working with you.
3. Work Flexibility
As organizations increasingly embrace remote working, some employers are providing their workforce with work from home benefits. Some are even reserving work from home for emergencies, such as when an employee can’t make it to the office. These flexible arrangements have a role in making people want to work with your organization.
With all the difficulties employers are experiencing today when hiring, any thought of employee quitting may leave you terrified. You doubt whether you can find a suitable replacement in record time to avoid disrupting your business operations.
Having read the above post, you now know how higher pay and better benefits can impact your employee recruitment, retention, and your overall company. The secret lies in recognizing that the two are not mutually exclusive but complement each other. Both have a significant impact on how you attract and retain top talents.
If you need help finding which plan makes sense for your company, schedule a plan discussion with us or take 30 seconds to find which plan is best for your company with The Retirement Plan Evaluator.