Why the right benefits are integral to retaining talent

After a chaotic few years for HR professionals – from the “Great Resignation” to drastic shifts in employee demands and expectations – things appear to be stabilizing as we enter 2024. Quit rates are down, pay increases have leveled off, and economic indicators (such as inflation) appear to be improving. However, it would be a mistake for HR professionals to survey these trends and become complacent. Employees are still under significant financial and mental strain, their level of engagement is precariously low, and retention remains a problem for many companies.

With January (a historically high turnover month) fast approaching, HR teams need to look hard at their efforts to retain employees – an assessment that should begin with their benefits strategies. Employees are no longer content with standard benefits like inflexible PTO plans that many don’t even use. They want companies to treat them like individuals with their own specific needs and priorities, which means providing personalized benefits packages that will help them improve their financial position, pursue their unique personal and professional goals, and prepare for the future.

The demand for personalized benefits is part of a broader trend toward flexibility in the workplace. As workforces become increasingly diverse, employees need to know that the company values and supports them as individuals. There’s no better way to convince employees to stick around long term.

How turnover harms your organization

In 2021, almost 48 million American workers quit their jobs – an all-time record until it was broken the following year when over 50 million people quit. The “Great Resignation” was jarring for many employers, who struggled to hold onto talent and couldn’t replace employees when they left. For most of 2022, there were two job openings for every candidate looking for work. Budgets for salary increases hit their highest level in decades this year as companies no longer take their employees’ loyalty for granted.

Beyond the direct financial burdens of replacing an employee (which Gallup estimates can range as high as twice the employee’s salary), there are many other ways turnover is destructive for companies – it leads to reduced productivity, damaged morale, and lower profitability. Employees often take years to become as efficient and productive as they’re capable of being, which means new hires will take time to reach a similar level of performance. Moreover, employers end up having to pay more for new hires than they would to retain their current employees — the average cost of replacing an employee is one and a half to two times their salary. And when employees consider leaving, they often become “quiet quitters” – a term that refers to psychological disengagement from work, affecting almost 60% of employees.

It’s no wonder that companies are trying to shore up their workforces with salary increases. While pay will always be a major priority for employees, HR teams must develop a deeper understanding of what causes turnover if they want to retain their top talent.

HR teams need to identify potential sources of turnover

While turnover may seem like a fact of life, the evidence suggests this isn’t the case. According to Gallup, 52% of employees voluntarily departing a company say their manager or organization could have done something to prevent this outcome. Almost the same proportion (51%) said that three months before they left, “neither their manager nor any other leader spoke with them about their job satisfaction or future with the organization.” This lack of individual attention and support is among the fastest ways to convince employees that they do not, in fact, have a future at the company.

Employees don’t want to feel like numbers. They want to be treated as individuals with distinct career aspirations, needs, and concerns, which is where the demands for personalization and flexibility arise. When companies don’t meet these demands, employees disengage. Just 23% of employees say they’re engaged at work, while 44% say they experience “a lot of stress” – the highest level Gallup has ever recorded. Gallup has found that critical aspects of engagement include recognition and praise, the belief that someone at work “cares about me as a person,” and the perception that “my opinions seem to count.”

The thread connecting these aspects of engagement is the expectation that employees won’t be treated as interchangeable with their colleagues. While meeting this expectation requires HR teams to openly and consistently communicate with employees about their needs, it also requires more tangible measures, such as revamping their benefits packages.

Increasing retention with the right benefits

At a time when 93% of organizations are concerned about retention, they should be taking concrete action to improve it. For example, HR teams that provide opportunities for advancement are in a stronger position to convince employees to stay. An employee who hasn’t made an internal move has a 56% chance of sticking with a company after two years – a proportion that jumps to 75% for employees who have made such a move.

Just as employees don’t want to be stuck in static roles with no prospects for development or advancement, they don’t want one-size-fits-all benefits. For example, although PTO is among the most common benefits, most employees aren’t using it. A recent Pew survey found that less than half of employees take all their time off, and their top reason is that they don’t feel it’s necessary. Employees also worried that taking PTO would cause them to fall behind, hurt their chances for advancement, or even cause them to lose their jobs.

Related: Employee-centered benefits will be key to attract and retain talent in 2024

What’s the point of a benefit if employees aren’t using it? HR teams can address this problem by providing flexible and personalized benefits such as convertible PTO, which allows employees to put the value of their unused vacation time toward their specific priorities – from retirement contributions to student loan payments. When PTO Exchange asked 1,000 workers if this benefit would make them more likely to stay with their current employers, 90% said yes.

Turnover remains an urgent problem for many companies, but it can be addressed in many ways. When HR teams provide benefits that treat employees individually and take their unique needs and objectives seriously, they will drastically increase retention.

Rob Whalen, co-founder and CEO of PTO Exchange