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Where to Cut Employee Incentives In a Tough Economy
While economists are happy to report that the economy is looking up, your balance sheets tell you differently. Your business is in a slump and has been for several quarters now. You know that you need to make cuts somewhere, but where?
While employee benefits and incentives are crucial to a productive, happy workforce, sometimes they need to be trimmed to balance the budget. When you have to make the hard decision to cut incentives during a tough economic time, follow the tips in this guide to minimize impact on employees and recover as quickly as possible when the economy rebounds.
- Don’t fool yourself. Take a hard look at your finances and make a realistic decision about what you need to cut. Many companies start out by cutting out too little, ensuring a slow, painful death for the company.
- Be transparent. By showing your employees your financial situation and inviting feedback, you can help people understand why some of their benefits need to be cut.
- Make cuts from the least necessary benefits to the most necessary. While health and retirement benefits may make up most of your compensation package, your employees would probably agree that these are the most important benefits they see. Before you go after incentives that people depend on, try to cut out things that aren’t absolutely necessary like company parties, vehicle usage and education reimbursement.
- Start cuts at the top. Your management team probably enjoys the most benefits anyways, and when your employees see that their management has already made real sacrifices, they’ll be less likely to complain when they are asked to do the same.
- Reinstate benefits when the economy rebounds. Many times, when a company cuts matching 401(k) contributions or raises health insurance premiums, those benefits never come back. If you reinstate benefits as soon as your company gets healthy again, you’ll be able to show your employees just how valuable they are to you.
It is important to remember that we often tell our employees when we cut their benefits, but we rarely tell them what all of their benefits mean to them.
You can quickly and easily share with your employees how much their benefits are actually worth at any moment through total compensation statements. View a sample statement to learn more.
Reducing Costs by Reducing Employee Turnover
Employee turnover costs are hard to pin down. Many employers don’t have the time to calculate their exact costs for replacing a worker since they the cost seems to be minimal and unavoidable. The truth is, however, that HR experts estimate that the cost of replacing one employee is at least 25 percent of that employee’s annual salary. These costs include:
Separation Costs
- Cost of exit interview
- Increase in unemployment tax
- Separation pay
- Administrative costs
Replacement Costs
- Placing job ads
- Cost of employees’ time for interviewing process
- Background check cost
- Bonuses and administrative costs
Training Costs
- Cost of training material
- Cost of trainers time
- Time it takes new employee to ramp up
Intangible costs also include the stress a short staff puts on other workers, interrupted client dialogue and lost company knowledge. If you add it all up, you are probably losing much more than you thought on each employee that leaves your company, so doesn’t it make sense to start doing something about it?
The solution to reducing turnover is different for every company. The most important thing you need to do is find out exactly why employees are not happy with your company and fix it. Are employees overworked? Do they hate the work environment? Do they want more competitive salary and benefits? You may not see a dramatic change within a couple weeks or even months, but whatever money you invest in your employees in the short term, you’ll see multiplied in the long term with reduced turnover and higher profits.
Effectively communicating to employees through employee benefit statements can help reduce turnover, as well. Ensuring employees are aware of the company costs associated with keeping them at the job can play a significant role in whether or not the DO stay at the job.
Would love to hear your thoughts and experiences on the costs associated with employee turnover in the comments below!
Why Can’t I Motivate My Employees?
You’ve tried everything to motivate your employees – bonuses, vacation time, recognition and even fear. And while some tactics have produced short-term results in certain employees, you still haven’t found that one magic bullet that motivates everyone all the time. So how can you get your employees to maximize their potential every time they come to work?
Leaders throughout the years have found that, while external motivation can become expensive and frustrating, internal motivation often produces amazing results. Rather than spending all your energy trying to get your employees to do something they don’t want to do, why not put them in a position that allows them to maximize their talents? Too many employees are stuck in jobs that do not challenge or interest them. As a result, they often find themselves thinking about or doing activities that they’d rather be doing during work hours.
Your best opportunity to find self-motivated employees comes during the hiring process. Take the time to learn about the job you’re hiring for, and then ask questions that reveal applicants’ real interests. Don’t ask them if they want to do the job you’re hiring for; of course they’ll tell you that they’re interested in the job. Rather, ask about their favorite and least favorite aspects of previous jobs. Ask questions that reveal their personality in addition to questions about technical skill. By looking for someone who has passion rather than a skill set, you’ll be much more likely to hire employees who will motivate themselves.
You can also help your current employees find motivation by putting them in positions that take advantage of their natural talents and interests. Ask your employees whether they’re happy with their current position or they’d prefer to be doing something else in the company. You can also start paying attention to their productivity and interest levels for different tasks to help you modify their current jobs.
Keep your employees motivated by giving them new challenges. Even if people are doing what they love, they’ll quickly lose interest if they’re not constantly being challenged. Adjust employees’ workload to make sure they are being pushed without being overloaded and trust them with new challenges when they’ve met their current goals. When your employees are doing what they were meant to do, you’ll be amazed at the change you’ll see in your office.
And when you do see that change, make sure you put it in their employee performance review!
Best Exit Interview Strategies
An exit interview is one of the easiest ways to reduce turnover in your company. It usually takes about 5-10 extra minutes to talk to an employee who is voluntarily leaving, and an interview can reveal information that you’d never learn from your current employees. Most employers who ask the right questions during exit interviews find departing employees extremely frank and helpful.
Even though exit interviews can provide invaluable information, studies have shown that most companies do not have a solid exit interview strategy in place. If you don’t have an exit interview process, follow our simple steps to get the most out of your exit interviews.
- The best time to ask employees the questions you’d ask during an exit interview is when they’re still happily employed. If you learn about problems within your company before it’s too late, you can stop dissatisfied employees from leaving in the first place.
- While some companies give departing employees a form to complete, we recommend a face-to-face meeting. This will produce more honest answers and provides more opportunity for follow-up.
- Make the exit interview comfortable. Employees should know that there won’t be retribution for an honest discussion.
- If the employee who is leaving is extremely valuable to your company, consider asking if there’s anything you can do to encourage him to stay. It can be relatively easy to retain an employee if compensation is his primary reason for leaving.
- Examine all feedback gathered from exit interviews and create policies that address recurring issues. The best exit interview in the world won’t do any good if it doesn’t lead to change.
The following are a few questions you may want to ask during an exit interview:
- What is your primary reason for leaving? Are there secondary reasons?
- Was there one event in particular that made you leave?
- What were the most and least satisfying parts of your job?
- Did your duties meet your expectations?
- Did anyone in this company discriminate against you or harass you?
- What would you do to improve our workplace?
- Were you happy with your compensation?
- Did you feel communication with management was open during your employment?
If you’re looking for more ways to reduce turnover, consider total compensation reports. These reports show employees exactly how much their benefits are worth.
How to Start Shopping for Employee Health Insurance
Whether you are a small company trying to improve your employees’ current benefits or you’re shopping for insurance for the first time, there’s no better time to buy health insurance than now. Thanks to the passage of the healthcare bill through Congress, companies with up to 24 workers and an average wage of up to $50,000 are eligible for hefty tax credits if they sign up for employee health insurance.
Unfortunately, many small companies find shopping for health insurance to be a traumatic experience. When employees learn about the new plan, there is always complaining about switching doctors, the cost of the insurance and services that are excluded. While there will always be some dissatisfaction, you can make the process go much smoother by involving your employees from the beginning.
A quick, anonymous survey through a website like SurveyMonkey can help you gauge your employees’ interest in health insurance features. The more detailed your survey, the better idea you’ll have of what your plan should look like.
- How happy are you with your current health insurance situation?
- What features would you change in the current healthcare plan?
- Which healthcare features are most important to you?
- Are you more worried about regular or emergency costs?
- How important are prescription costs to you?
- Many services like optical care are excluded from some health insurance plans. Which services would you like to see in your plan?
- How much would you mind changing your current doctor if it meant a reduction in premiums?
After you narrow your selection down to a few options, have your designated insurance broker come to your office on company time to meet with employees. Health insurance can be confusing, and a meeting with an expert can answer many employee questions and relieve fears before your office gets overwhelmed with confused employees.
After you choose a health insurance plan, show your employees how much it is worth through COMpackage’s Total Compensation Statements.
Twenty Creative Employee Outings
Show your employees that you appreciate them by sponsoring an outing either during or after work. These outings don’t have to break your budget, but, as many employers have discovered throughout the years, they can be extremely useful for building camaraderie and improving morale.
We’ve assembled a list of 20 creative ideas for employee outings. Feel free to add onto this list by asking your employees for suggestions and considering even the most outrageous ideas.
Team contests
It doesn’t matter what the contest is as long as you follow one rule – everyone participates. These contests should be activities that everyone in your company can enjoy, regardless of athletic skill level.
- Wii tournament
- Karaoke contest
- Scavenger hunt
- Recess games
- Laser tag
Community Service Projects
Community service activities not only draw your employees together, they also allow your company to give back to your community.
- Sponsor a work team in a charity walk or race
- Plant trees or clean up a neighborhood
- Split the company into two teams and see who can raise the most money for a charity
- Let employees choose the service project, then use a Friday to complete the project as a company
Sports
Sports have the ability to draw people together in ways that few other activities can. Consider sports activities that may interest even those who don’t necessarily like athletics.
- Sponsor a company sports team
- Sponsor a company “fitness club”
- Leave work early to attend a daytime baseball game
- Volleyball, softball or basketball tournament
- Miniature golf
- Bowling
Get Togethers
If you’re looking for a more laid back activity, consider an informal get together. Through these gatherings, your employees can meet each other’s families.
- Movie night
- Family picnic
- Informal happy hour
- Tailgate in the parking lot
- Holiday themed party
You can choose to show your employees how much benefits like employee outings, company cell phone usage and suburban office free parking are worth through a total compensation statements.
One Simple Idea to Help Managers Improve Productivity and Lower Turnaround
Unfortunately, not every manager can be Michael Scott, CEO of Dunder Mifflin. However, managers can improve productivity and lower turnaround by taking a big cue from Michael Scott — MAKING WORK FUN. If your employees enjoy coming to work every day, they’ll work harder and complain less. The following tips are designed to help you change the culture at your workplace:
Be more like Michael Scott by:
- Relaxing
“Professional” does not have to mean “serious.” As an employer, you should strive to implement a personal conduct policy that allows your employees to work in a safe environment and enjoy themselves at the same time. This may mean that you take a hard stand on sexual and cruel jokes, but remain more lenient on harmless goofing off. Think through all your policies; don’t just create a rule to stop people from having fun or as a kneejerk reaction to a single incident. - Planning outings during work
If possible, plan occasional company outings during work hours. Through these outings, your employees will grow closer and create memories they’ll cherish for years. Remember that your outing doesn’t have to be elaborate or expensive to be effective. While you could splurge and take your employees to a miniature golf course, bowling alley or baseball game, you could just as easily schedule a picnic, karaoke contest, talent show or game time in the middle of the workday. - Surprising your employees
Treat your employees to something special without telling them. You could give them a few extra hours off work one Friday, put treats in the break room or schedule a casual dress day. Remember that even little surprises can mean a lot. - Sponsoring theme days
While you may already allow your employees to dress up on Halloween, consider sponsoring other theme days. For example, for one day each year, you could allow jeans, shorts, hats, local sports team apparel or workout gear. The possibilities are endless, so get creative. - Spreading Joy
When managers act like jerks, they can bring a whole company down; but when they start spreading joy, management can effect a cultural change that quickly spreads across a company. Stress to your management team the importance of smiling and complementing employees. - Decorating
Sprucing up the workplace with a few plants and pictures can work wonders for employees’ mood. Consider posting artwork created by your employees or their children.
One final way to improve morale at your company [not sure if they do this at Dunder Mifflin or not 
] is by distributing total compensation statements. These statements can show your employees how much they’re valued by connecting a dollar amount to their benefits.
Real Examples of Creative Employee Perks & Benefits
Trying to think of creative perks to motivate your employees? Here’s a list of some of the most creative perks we’ve come across from the 2010 and 2009 Fortune “100 Best Companies to Work For” issues to help get you started. While your business may not be able to afford many of these perks, these examples can at least help you start thinking outside the box as you brainstorm ideas for perks.
- Qualcomm hosts a weekly farmers market that allows employees to stock up on healthy food.
- Umpqua Bank lends employees money for business attire purchases and sets up a payroll deduction so the employees can repay the bank at no interest.
- Stew Leonard’s Company invites employees with 20 years of service to dinner at the home of the company’s founder with a gourmet meal and fine wines.
- Paychex has an extensive employee wellness program that awards up to $300 to employees for doing activities like getting flu shots and dental check-ups, attending aerobics or yoga classes, running a 5K race and biking to work.
- Atlantic Health rewards its employees with a ton of vacation. All employees who have been with the company for at least 5 years get 28 days of paid vacation. New hires receive 18, 23 or 28 vacation days depending on their positions.
- The Marriott hotel chain helps employees and their immediate family move by assisting with buying or selling a home, closing and settlement, mortgages and moving.
- Two artists-in-residence work full-time at SAS and have produced a 3,000-piece art collection.
- Genetech offers $4 per rider per day for employees who offer carpool rides to their coworkers. Employees who commute by bus, train, van, ferry, or bike also receive $4 daily.
- Vanderbilt gives their employees 70% tuition subsidies to attend any college in the U.S.
- Scottrade considers opening an office for employees who want to relocate in an area where a branch doesn’t exist. The company has already done this for more than 20 employees.
Show your employees how much their perks are worth through a Total Compensation Statement.
Do you have a creative idea for giving your employee perks? Would love to hear it in the comments below!
Benefits & Drawbacks of Employee Cash Incentives
Ask most employees if they’d rather have cash or non-cash incentives, and they’ll choose the cash incentives almost every time. However, as an employer, you have many other factors to consider when choosing an incentive other than whether or not employees say they want it. Carefully consider the benefits and drawbacks of cash bonuses before creating your incentive program.
Benefits of Cash Incentives
- Nothing talks louder than cash – Many employers find that as soon as they offer cash incentives for a task, their employees start working harder. For fast, effective gratification, few incentives work better than cash.
- Easy to distribute – Cash incentives require little extra effort on the part of an employer to distribute. Money can either be added to a paycheck or distributed as cash.
- Practical – Many non-cash incentives appeal more to some people than others. While some employees may not need a new iPod or tickets to a sporting event, everyone can benefit from a little extra cash.
Drawbacks of Cash Incentives
- Can become viewed as base pay – When employees receive cash bonuses on a regular basis, they can come to expect them as part of their base pay. For example, many people rely on their annual Christmas bonuses or quarterly commission checks to pay their bills. If these benefits ever have to be taken away, things could get ugly fast.
- Disappears quickly – Cash incentives are often quickly forgotten because they are spent on necessities – things like bills, debt or Christmas presents. On the other hand, even small non-cash incentives like movie tickets, electronics or gift cards are remembered long after they’ve been received.
- Takes the joy out of incentives – Non-cash incentives often make a more positive impact because they are viewed as “treats,” while cash incentives are often seen as more practical.
The best incentive programs often involve a mix of cash and non-cash incentives. To show your employees how much their non-cash incentives are worth, consider total compensation statements through COMPackage.
What Percentage of an Total Compensation Do Employee Benefits Account For?
Employers are often perplexed by how much they should spend on employee benefits. How much is too much for things like vacation time or bonuses?
A recent report released by the U.S. Bureau of Labor Statistics showed that benefits make up about 30% of the average worker’s paycheck.
The report provided separate numbers for civilian, private, and government workers, but for the purposes of this article, we’ll just look at the private business numbers. The highest percentage of benefit costs for private employers was required benefits, at 8.2%, followed by insurance at 7.8% and paid leave at 6.8%
According to the report, an employee with an annual salary of $50,000 would have a total compensation of $70,721. That employee would be paid:
$5,800 for legally required benefits
$5,516 for insurance
$4,809 for paid leave
$2,405 for retirement and savings
$2,122 for supplemental pay
Show your employees how much their benefits contribute to their pay through a total compensation statements from COMPackage.
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