Companies have found something to give their workers instead of raises
By Ylan Q. Mui
July 28 at 12:53 PM - The Washington Post
Once a staple of the American workplace, the annual raise is turning into a
relic of the pre-crisis economy as companies turn to creative -- and cheaper --
ways to compensate their employees.
More businesses are upping their spending on benefits such as one-time
bonuses, health care and paid time off, according to recent survey data. Many
are rolling out perks such as free gym membership, commuting subsidies, even pet
health insurance.
But often, those benefits are being provided in lieu of higher salaries.
Government data shows the growth in spending on benefits is outpacing gains in
wages. Companies say the structure caters to the growing workforce of finicky
millennials who prize flexibility over stability and allows them to reward star
employees without increasing fixed costs.
gTherefs been this seismic shift,h said Gary Burnison, chief executive of
Korn Ferry, an executive search and talent management firm. gAnd I think one of
those is that the raise has gone the way of the gold watch.h
The decline of the raise could help explain one of the most frustrating
puzzles of the Americafs lumbering economic recovery: stagnant wages. Wage
growth has been stuck at about 2 percent for the past five years despite a rapid
drop in unemployment and a surge in hiring since 2014. Without a bigger bump in
their paychecks, many workers feel the recovery remains elusive.
But some economists say the focus on wages is short-sighted. Bonuses and
other awards have spiked to the highest level in more than three decades,
according to an analysis by Aon Hewitt. A survey this summer by a human
resources industry group found about 35 percent of companies increased spending
on benefits, up 7 percentage points from the previous year. That included health
care, bonuses, vacation time and tuition reimbursement -- making up about a
third of workersf total compensation.
gWages tell you almost nothing,h said John Silvia, chief economist at Wells
Fargo. gIt has changed over the last 20 to 30 years as companies try to
compensate workers in a way that matches their lifestyle.h
When Ashley Chandler went beyond the call of duty at her sales job, she was
rewarded not with a bigger paycheck but with something she said was just as
valuable: time.
The 25-year-old spent weeks poring over paperwork at the flooring
installation company where she works in North Carolina to help one of the
managers close some complicated projects on time -- the type of dedication that
a generation ago might have placed Chandler first in line for a big raise at the
end of the year.
At a hourly payments firm Justworks in Manhattan, that means eschewing
the standard matching contribution to employeefs 401(k) retirement plans in
favor of paid gym membership and pre-tax commuter benefits for its millennial
employees. Across the country, standard raises at Los Angeles-based Korn Ferry
run about 3 percent, but the company is considering doubling its maternity
leave. And at MonMan, which manufactures and installs high-tech floors, Chandler
received three extra days of paid time off.
gWould I like to make more? I think everybody would like to make more,h she
said. gBut for me, what I liked most about it was the flexibility.h
Of course, the growth in benefits has only occurred at businesses that offer
them in the first place, many of them in white-collar industries where salaries
are more generous. For many low-skilled workers, the paycheck is the end of the
story. In industries such as retail and fast food, labor groups are pushing to
raise the minimum wage to $15 an hour. And even in jobs that have enjoyed bigger
benefits, financial experts warn that workers often donft always come out ahead
if they sacrifice dollars for other forms of compensation.
The shift toward bigger benefits and smaller salary increases accelerated as
firms tightened their belts following the financial crisis, experts say, but it
is rooted in broader demographic changes in the nationfs workforce. Millennials
say they prize the freedom to work away from their cubicles, while businesses
have learned that flexible compensation can help the bottom line.
At MonMan, Chandlerfs boss, Ryan Hulland, used to give employees 6
percent or 7 percent raises, no questions asked. But that was before the 2008
financial crisis, when the boom in high-tech construction that drove sales of
the companyfs specialty flooring began to drop off. In downtown Charlotte,
Hulland saw work grind to a halt on the gleaming skyscraper Wachovia Bank once
planned to use as its corporate headquarters. The bank was taken over by Wells
Fargo, and Hulland was determined that his company would not meet a similar
fate.
gI donft want to be caught in a double dip recession,h Hulland said. gI donft
want to be caught in a position where we have overextended ourselves.h
So he slashed raises to 3 percent and began searching for other ways to
reward his best employees. Hulland started by giving out $100 gift cards and was
taken aback by how excited workers were to receive them. Encouraged by the
response, Hulland began offering an intangible reward: extra paid time off.
Though the dollar amount didnft make up for the smaller raises, human
resources experts say such rewards provide a more immediate psychological boost,
particularly when times are tight.
gThatfs why we give people gifts at Christmas and not just bags of money,h
said Andrew Chamberlain, an economist at job search firm Glassdoor. gThey can
build a relationship that goes beyond a paycheck.h
When Korn Ferry reached a major milestone this summer of a record $1 billion
in annual sales, the companyfs chief executive wanted to thank the employees.
But instead of giving everyone more money, Burnison opted to make them work
less: The company will be closed the Friday before Labor Day and the week
between Christmas and New Yearfs.
gGiven the demanding world in which we operate, I know we are all pulled in
many directions and never seem to have enough quality time with family and
friends,h he wrote. gThis year, we would like to take a small step to improve
that situation and demonstrate our appreciation for your dedication and
commitment with the gift of time.h