The United States is currently nearing full employment with the unemployment rate under 4%. Such a hypercompetitive labor market calls for innovation and creativity in luring and retaining top talent. A new study that sheds light on how employees value benefits may help employers maximize the “bang for the buck” of benefits packages offered to prospective and current workers.
An article published by Bloomberg highlights a National Bureau of Economic Research working paper that reveals which benefits employees prefer, and actually assigns a dollar amount that employees are willing to forgo in the form of wages in exchange for each benefit. The study’s data (displayed below) shows that in many cases American workers are willing to forgo “substantial” earnings in exchange for specific non-wage benefits that more than offset the equivalent cost to the employer of offering such benefits.
Importantly for employers, the data indicates that more paid time off and a flexible schedule could lead to reduced cost of labor for employers as well as happier employees – this holds true regardless of the job. For example, while a 10-day workweek represents only 4 percent of a standard work year, employees value 10 paid days off from work as the equivalent of 16.4% of their wages. This result is not surprising considering that Millennials currently make up the majority of the American workforce. More than any preceding generation, Millennials seem to desire more balance between work life and home life. Regardless of the job title or industry, many want the freedom to live and work on their own terms.
When you couple the study’s findings with the fact that most Americans feel overworked, it is not surprising that companies are adjusting their approach to employee compensation and benefits. Just recently, Amazon began allowing some of its employees to work a 30-hour workweek instead of 40 hours or more. Under this new optional compensation plan, Amazon’s employees receive 75% of their salary, but retain full benefits, such as paid leave and flex hours. Amazon hopes the pilot program not only lures people who historically have trouble entering the full-time workforce‒like students and parents‒but also increases productivity. According to a study from Stanford University, employee output slows sharply after a 50-hour workweek and continues to diminish rapidly after that. Other companies with similar goals, such as KPMG and Deloitte, have instituted similar 30-hour-workweek options for their employees with the expectations that a worker with more agency and work-life balance will be motivated to produce at a high level.
As always, employers should weigh their business goals against the risks of altering compensation strategies. Economic pressures and industry specific restrictions may prevent companies from offering certain benefits, but employers should keep an eye on new data, as well as the strategies employed by innovative early adopters, in this increasingly competitive labor market.
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*Special thanks to Thomas Raine, who assisted in the drafting of this post. Thomas is a third year Juris Doctor Candidate at the University of Miami School of Law.