Employee Benefits: Rising Costs vs. Necessary Incentives

by Maggie Taylor, writer, Inside Rubber

Employers in virtually every industry are struggling to attract and retain high-quality employees. Large and small businesses alike are scrambling to overhaul their wage and benefit structures to remain competitive in a highly volatile employment market. Many companies have found themselves locked in constant competition with other local businesses over a singular pool of employees and workers. Leaders and human resources professionals in the manufacturing industry are experimenting with a variety of solutions and changes to deal with these ongoing challenges.

A primary struggle for many companies is the challenge of offering a competitive rate. In the Detroit area, for example, multiple Amazon facilities and the “Big 3” automotive manufacturers are major competitors, especially for smaller companies and tier suppliers.

“Now that the larger companies are back in production, they’re making offers to our employees that we can’t compete with. One of the Big 3 has taken three of our people in the last two months,” said Audra Kimbel, human resource manager for PolyFlex Products, Inc., Farmington Hills, Michigan. “Those were key positions for us. We’ve been able to backfill them, but you’ve got to start the training all over again. A leadership change does bring a fresh perspective, but when it comes all at once, it doesn’t give you a whole lot of time to adapt.”

Most businesses have raised pay rates multiple times over the past two years in an attempt to remain competitive. Suzie Thomas, accounts payable, reported that Eclipse Mold, Inc., Chesterfield, Michigan, has implemented three substantial wage increases since 2019, anywhere from two to four dollars. And those changes have applied to long-term employees as well as new hires, though the exact rate – within a specified range – is determined by seniority and good standing. The company currently is exploring what a wage ceiling might look like for long-term employees. “It’s hard because there’s a point where they’ll cap out. We haven’t done that yet,” said Thomas.

PolyFlex Products also has changed its pay rates to $15 per hour for general labor and adjusted its policy for paying temporary employees. The company paid a higher rate of $16.50 to temporary employees but offered a slightly lower rate of $15 for a full-time role, with the promise of a one-dollar raise at the 90-day mark, pending good performance. PolyFlex Products tested this strategy on five employees from temp agencies and have retained all five. However, there’s risk involved when hiring temporary employees.

“Temp employees outshine regular employees until they get hired,” said Kimbel. “Suddenly, they’re missing days or being unsafe or having problems on the floor with other people. That’s always a risk you take. So, we’re trying to work out the kinks right now.”

Many companies are struggling to balance wage increases against the overall rising costs of doing business. “Obviously, with everything else going up, so are our costs,” said Thomas. “It’s been a struggle. The price of materials is going up. We’ve gotten quite a few new jobs in, which we’re quoting differently. And we’re negotiating new terms and new prices with long-term customers, but it’s a slow process.”

Businesses also are being forced to consider their employees’ expenses in their calculations. “I started tracking daycare expenses, fuel costs and food prices back in March,” said Kimbel. According to her research and records, the cost of sending a single three-year-old child to daycare in the Detroit area, the 14th largest metropolitan area in the United States, is around $340 per week. For some employees, childcare costs account for their entire paycheck – or more. “Their money is going to daycare,” said Kimbel. “They’re not earning anything. They’re losing more money. That has become more of a reality that we haven’t addressed yet.”

Recruitment professionals have experimented with a variety of additional benefits to incentivize new hires – with mixed results. “A lot of entry-level people have state benefits,” said Thomas. “Benefits are not a high priority for people in my area. More paid time off would be the only benefit that actually would attract people.”

Different types of cash incentives have proven to be slightly more effective, though the results are not dramatic. PolyFlex Products began offering a $500 bonus to any employee who referred a new hire who stayed on for at least 90 days. “We thought it would have more of an impact,” said Kimbel. But some employees have taken advantage of the program. “One guy has referred four people,” she said.

Some companies have implemented more flexible work-from-home policies. But for some roles, that benefit is irrelevant. “People on the floor have to be here,” said Kimbel. “They can’t work from home.” Kimbel shared that PolyFlex Products is exploring the possibility of a program to help employees offset the rising costs of fuel. The program would award a weekly “appreciation allowance” to employees who worked their full schedule, at least until gas prices drop below four dollars per gallon.

Gas prices are not the only transportation barrier affecting recruitment. Many major public transportation providers are experiencing similar hiring struggles and have cut back on routes due to a driver shortage. In the Detroit area in particular, this has led to a gap in the bus schedule that affects second-shift workers.

“That’s a huge issue for us right now,” said Thomas. “People are saying, ‘I can’t do second shift because I can’t get home.’” Thomas has been working directly with the local transit authority to add a bus stop that would accommodate second shift, but until more drivers are available, the problem remains. “If they don’t have anyone to drive a bus, they
can’t get home,” she added.

PolyFlex Products has offered two solutions to the issue: a partially funded carpool program and flexible scheduling.

Commute with Enterprise is a program that groups employees by zip code or other criteria to share a vehicle for commuting purposes. Thanks to reimbursements from the Michigan Department of Transportation (MDOT), the cost of Commute with Enterprise is $120 per month for PolyFlex employees. That payment includes a vehicle, regularly scheduled vehicle maintenance and a gas card. The employees in the pool can share the vehicle for regular errands as well, such as grocery shopping and healthcare appointments.

However, the program hasn’t attracted much interest. “So far, just one person has taken me up on it, and he wound up having to resign,” said Kimbel. “I brought it up in a meeting, asking people to compare it to their car payment. You could be making money by following through with this program. But people just didn’t want others to know where they lived.”

Flexible scheduling has proven to be an effective solution under some circumstances. Many companies offer staggered start times, shorter shifts, swing shifts and other creative solutions so that employees can catch a bus or use a shared family car. Eclipse Mold has begun offering part-time, four-hour shift options for the first time.

“We’ve never done that before,” said Thomas. “We’ve always had very strict eight-to-four shifts. But now, if someone wants to four hours or six hours, I’m saying, ‘Let’s see what we can do.’”

PolyFlex Products also has seen positive results from offering more flexibility. “We have had such a great review on that,” said Kimbel. Some employees have adjusted their shifts to start earlier or later based on bus schedules and their families’ needs. According to Kimbel, these flexible options have contributed to employee retention. The staggered schedules also have led to better coverage for truck pickups.

While these flexible and creative solutions may not yield dramatic results, the outcomes can be positive. Even a small advantage over local competitors can make a difference in a business’s ability to retain its employees and hire new ones. In any case, refusing to stray from traditional methods of hiring and doing business doesn’t appear to be the appropriate strategy for successful recruitment. Remaining open to change and fresh thinking can help manufacturing industry leaders weather the ongoing challenges of the labor shortage so they can maintain progress toward their business goals.

Reprinted with permission from Inside Rubber,
www.insiderubber.com.