With a recession on the horizon – or already here, depending on who you talk to – employees are feeling the sting of inflation, and employers are feeling the financial pinch from decreased consumer buying power and increased caution in spending. Traditionally, layoffs are one of the first options to save money, which harms productivity and employee morale in the long run. In today’s economic climate and tight labor market, CFOs have much to consider and a unique opportunity.
Americans are awful at using vacation hours. Even with lucrative time off policies, paid time off (PTO) hours can sit in a bank waiting to be used or cashed in when an employee leaves the company. The standard has been a tiered benefits package based on years of service with the organization. While the quality depends on the package, what’s true across the board is not every person will use every benefit. According to recent studies, women and persons of color are far less likely to use all their PTO. Furthermore, female team members are more likely to value an emergency fund than their male counterparts. Translation: your company is probably paying for benefits your employees may not use or value.
More and more companies are using convertible benefits to create flexibility and increase utilization, maximizing the employees’ value and balancing company’s cost.
Convertible benefits increase employee satisfaction. Approximately 80% of employees are not actively engaged, costing the company funds in productivity waste and increasing the likelihood of turnover.
- Studies have shown an improvement in job performance and engagement when the employee feels heard by the employer, which includes what benefits they need or want.
- And when team members stay, employers naturally save on the recruiting, onboarding, and training costs of hiring a new employee.
Convertible benefits create an inclusive and attractive work culture. When recruiting new team members, studies show a diverse workforce is a key factor for many job seekers. A flexible benefits package can help attract talent from a range of backgrounds.
A convertible benefit program does not have to be complex. Employees should be able to use their PTO or trade it in for cash contributed to a retirement account or money to create an emergency fund. Younger team members may want to convert unused PTO into payments toward their student loans. The goal is to give the team options, listen to their feedback, and adjust where you can. For assistance reviewing your human capital costs and ideas on avoiding layoffs and salary reductions, please get in touch with our trusted team of professionals.
Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the Internal Revenue Code, or for promoting, marketing, or recommending any transaction or matter addressed herein.