In tough economic times the cost of employee turnover is a threat to company finances. A broker who can help clients increase employee satisfaction has a valuable low-cost hook to benefit clients while incurring few administrative duties.

There has been mounting speculation about the end of the recession. Some of the debating points are whether or not we’ve already reached bottom, when we can claim a real recovery and if we will see a second decline in 2010. Regardless of the answers, employers should be formulating their own post-recession game plan.

Cost reduction and increased efficiency will continue to be ongoing issues. But employers will also have to take into account the expectations of their employees. Many of the measures taken by employers to shore up their finances during the recession could damage employee morale and loyalty. Once employees perceive the recession is over they will expect employers to rescind measures that curbed their compensation and benefits.

When the job market opens up again employees who are not satisfied will begin to look for other work. A recent SHRM survey, titled “2009 Employee Job Satisfaction,” reveals that 31% of the employees polled intend to enhance their job search efforts once the economy and job market recover.

A separate Adecco Group survey concludes that 54% of employees are likely to look for new jobs, and that number jumps to 71% for workers ages 18-29.

Employee turnover is costly. Separation costs, vacancy costs, replacement costs, training costs and performance differentials can quickly add up. While the magnitude of these costs varies greatly, finding and keeping good employees is uniformly more cost effective than finding replacements.

Subjective value of a dollar

Yet another recent SHRM study, “2009 Employee Benefits Survey Report,” contains detailed data on trends in employee benefits and the changes that have occurred since 2008. Of the organizations reporting for 2009, 60% responded that the financial crisis has affected the benefits that they offer employees.

However, the report notes that “a disconnect exists between the dollar amount organizations spend on benefits and the employees’ perception of the value of the benefits package.” This implies that there are certain measures that could be implemented to increase employee satisfaction that are at the same time cost effective for the company.

For brokers, the use of benefit summaries or interactive Web sites can help employers explain the still significant cost of benefits.

Effective post-recession planning recognizes the importance of retaining existing employees by capitalizing on ways to increase employee satisfaction without significantly increasing costs.

The most effective plans will require taking into account the specific demographics of a company’s workforce, the measures taken by the company during the recession and employee attitudes throughout the announcement and execution of new measures.

Established workers

The SHRM survey on employee satisfaction reveals that workers with more than 16 years tenure and those older than 55 ranked job security first on a list of the top five aspects of job satisfaction. Benefits were ranked second.

The 55-plus age group was hit particularly hard by the economic downturn as they saw retirement savings evaporate and their retirement horizons extended. While this group is traditionally less likely to seek a new job, general dissatisfaction over these losses and actions that a company could have taken, such as suspending their 401(k) matching program, could prompt workers close to retirement to seek other employment.

Workers between the ages of 35 and 55 as well as those with six to 10 years tenure rated job security, benefits and compensation as their three most important aspects of job satisfaction.

However, in this economic climate it is unlikely that a company will be able to increase benefits or compensation. New strategies must be developed to maximize what an employer currently offers to employees alongside initiatives that approach the issue of satisfaction from other angles.

This is particularly important because even though 41% of employees indicated that they are very satisfied with their jobs in 2009, only 29% indicated that they were satisfied with their compensation, which gives it the lowest overall satisfaction score from employees.

By focusing on the other criteria that their employees value an employer can increase employee satisfaction. The most cost effective of which would be to increase and/or widen the channels of communication between the employee and varying levels of management.

“Dialogue is a key initiative from all levels of leadership to staff. When people are worried about their jobs, they must have all the information and have a chance to sound off,” Marie LaMarche, a member of SHRM’s employee relations special expertise panel, says.

In addition to providing a channel for employee concerns, an increase of communication within the company will also help to facilitate the employee relationship with management, which 51% of employees and 66% of HR professionals rated as very important to job satisfaction.

The survey concludes that employers can “keep employee satisfaction levels high by offering benefits that are intangible and cost effective … and educating their employees on the benefits available to them.”

The newcomers

If a little bit of specialization can go a long way with regards to increasing employee job satisfaction, then younger and newer employees will feel the greatest impact. The SHRM report on employee satisfaction finds that these employees are less concerned with retirements benefits.

Instead, employees younger than 35 and those with less than two years tenure place more importance on career advancement and development opportunities than employees older than 55 or with tenure of more than 16 years.

Networking, which 70% of employees rated as important or very important, was also given more emphasis by those with less than two years tenure as well as by those at larger or medium-sized companies where networking is more easily facilitated.

This data suggests that younger employees are less likely to leave because they have lost faith in the company due to the financial crisis or are disgruntled by reductions in their benefits. They are more apt to move when a better offer comes along.

As the Adecco Group Survey reveals, less than 1 in 10 workers between the ages of 18-29 would be willing to take a pay cut to keep their jobs, compared to 1 in 5 older workers.

It would be easy to write off younger employees as a waste of resources if they are likely to leave anyway.

However, as the Adecco Survey also notes, young workers often provide much of the current innovations in the workforce. Perhaps the best way to increase loyalty amongst younger workers is to nurture the relationship between supervisor and employee. Employees with less than two years of tenure rated the relationship that they have with their immediate supervisor as the most important factor in a list of top five aspects of job. EBA

Dropping the match

The 2009 SHRM survey of employee benefits offerings reports that in 2009 72% of employers continue to offer an employer match for defined contribution plans, down from 75% who offered the benefit in 2008. Of those employers who still fund matching programs, 7% have plans to reduce or eliminate the benefit in the next 12 months. No number was reported for employers who plan on introducing a matching benefit in the next 12 months.

Of employees responding to the SHRM survey on employee satisfaction, 45% said that, “suspension of retirement plan contributions by their employer would significantly affect them.”

Suspension of matching programs makes financial sense for a company looking to cut costs. However, with the increasing importance of benefits to employee job satisfaction it is important that brokers help their clients to figure out a way to maximize remaining benefits in order to stay competitive. It will be important to understand the effect that suspending a matching program will have on morale, productivity and loyalty in order to mitigate negative effects.