Beyond chocolate and conversation hearts, many employers are looking to seriously woo employees this Valentine’s Day, and throughout the year. In fact, for most companies, retaining and attracting the best talent in today’s fierce labor market is a top priority in 2022.
The Great Resignation (aka the “Big Quit”) is in full effect. According to a Bureau of Labor Statistics (BLS) report released January 4, 2022, a record 4.5 million Americans left their jobs in November, with the number of private sector quits (not government or farm employees) hitting 4.3 million-and approximately 20 million people quit their jobs in the second half of 2021. And, there are just 0.62 unemployed job seekers for each available job, according to another BLS report. The forecast: employees are likely to continue to have substantial bargaining power in 2022. So employers who want to hold onto the great employees they have-and perhaps take their shot at hiring more- may need to look for creative ways to up the ante this year.
Here are five things employers are doing to retain and hire the best of the best talent in 2022.
Embracing remote work–because it allows for the flexibility some employees are demanding
Remote work was indispensable for many in the early pandemic. Now, having the option to work remotely-at least some of the time-is becoming an expectation. According to a survey of 209,000 people in 190 countries by BCG, 89% of people expect their jobs to be partly remote after the pandemic ends. Hybrid work is now a norm for many employers as they pivot to navigate the ebb and flow of COVID variants, allowing for the flexibility required by the pandemic and meeting employee desires. According to Forbes, in a recent survey of US workers who can work remotely, 74% would prefer to spend at least one day in an office environment post-COVID-19, with 30% looking to work from a space outside the home two or three days per week. Digital nomad visas-which allow employees to work in a different country after an application and a fee-are another lure for some employees who can successfully work away from the office.
What does this mean for employers? In industries and for positions where working remotely is a viable option, employers who don’t offer employees the ability to work remotely-at least part of the week-may see employees jump ship to employers who do. In one report published by Owl Labs, companies that provide the option for remote work have 25% lower turnover than companies that don’t.
But remote work isn’t as easy as just telling employees they can work from home-or wherever they want.
Employers must consider a myriad of employment law issues before crafting any type of remote work policy, including:
- How employers will define “remote” for their workforce–i.e. temporary “short stints,” permanent remote work, hybrid work (working some days from home and others in the office), or some combination of these. And, employers must decide whether employees will be permitted to work remotely only from home, or remotely from anywhere.
- “Guardrails” or boundaries for the workforce. Often, this is based on factors such as whether the company already has a legal presence in the subject jurisdiction and ensuring employees can remain subject to company rules and expectations in the jurisdiction from which the employee is requesting to remotely work. Other factors, such as head count triggers for application of paid sick leave laws, must also be taken into consideration.
- Designing an application process with established criteria. Where used, an application process should cover details such as which job positions can be performed remotely, eligible locations, whether a justification is required, and the objective criteria for accepting / rejecting applications. Decision-makers must be trained on applying the criteria objectively.
- Developing policies to support the remote model, including salary/cost of living adjustments, how necessary equipment will be provided and whether certain costs will be reimbursed, how the company will track hours/overtime/mandatory rest breaks, necessary steps to mitigate increased risks of misappropriation of confidential information and trade secrets, and revising the business travel policy as necessary to apply to remote workers.
- Providing employees with individualized remote work agreements, setting forth important information such as the effective date of the arrangement, expected hours of work, use of equipment, reimbursement/stipends, insurance requirements, and compensation. Agreements should also confirm the work location (to document the employee’s representation of the jurisdiction in which they are working and paying taxes) and protect the company’s right to recall employees to an onsite location.
- Training managers and supervisors on the importance of treating all employees equally, whether they are in the office daily with substantial “face time,” or almost never in the office with only remote meeting “face time,” to avoid discrimination claims.
However employers decide, any type of remote work program raises a plethora of compliance issues-including employment law as mentioned above, as well as benefits and compensation, tax, privacy, and corporate law issues-all of which change from jurisdiction to jurisdiction. As employers design and implement remote work programs, they should work with counsel to stay compliant.
Offering competitive compensation– to attract and retain talent
Nearly a quarter of US employers lifted compensation or gave bonuses during the pandemic, according to a government survey. Even if employees are otherwise happy with their position, a promised increase in wages by another prospective employer may lure them away. Right now, the unyielding labor market in some industries and the expense of finding and training new employees has driven companies to raise wages and offer perks to keep employees in place-and the domino effect is across the board. In addition, so-called “wage compression”-when pay for entry-level employees or new hires approaches the pay level of senior employees who have been with the company for years-has become an issue for employers, as long-time workers look for an increase in pay to incentivize them to stay.
What are employers doing to make sure they don’t lose their best employees to a bump in salary, wages, bonuses or other perks?
- Benchmarking against market demands-not only for new hires, but also for those who have been with the company for some time. Employers may need to conduct market research to determine market pay, and may need to conduct a pay audit to determine which incumbent employees should get a pay bump. These steps may help employers avoid claims of pay inequity and discrimination from disgruntled employees who have been with the company and question entry-level or new hire wages close to theirs.
- Rolling out retention bonuses, which shows employees they are appreciated and saves the company money in turnover costs. A recent report by BuiltIn estimated that the average cost of losing an employee can be between 1.5 to 2 times the employee’s salary, with hourly workers on the lower end and technical and C-suite positions on the higher end.
- Offering an education reimbursement program. With so many institutions offering online learning options, people are going back to school in droves. In a recent survey by Wiley Education Services, nearly 6 in 10 prospective online learners said the pandemic had motivated them to enroll in an online program, and slightly more than half said they now hold more positive views of online learning. And a recent Willis Towers Watson report found that 88% of employers surveyed currently offer tuition reimbursement programs or plan to offer them over the next two years. Offering to cover the costs of tuition in exchange for continued employment may not only contribute to retention, but also ensure the workforce is made up of highly-qualified and talented employees.
- Revisiting equity programs. ESOPs (employee stock ownership programs) offer bonus or incentive compensation while providing employees with the status of becoming financial stakeholders in the company, and profit sharing is a way to share the company’s financial upside with employees. Both of these tools offer not only an incentive for employees to stay, but also to keep them invested in the company’s performance.
Retaining employees through compensation isn’t as easy as handing out a bonus check. Compliance issues abound, including possible tax consequences, state and federal wage and hour laws, and potential claims of discrimination if some employees are awarded more compensation than others. In addition, employers may be concerned about employees pocketing a retention bonus or education reimbursement before heading off to other pastures. Employers can consider incorporating “clawbacks”-contractual provisions requiring an employee to repay the compensation if, for instance, the employee terminates employment or does not remain employed for a predetermined period of time-but these add another layer of issues to consider, including legality in certain locations, possible tax issues related to recouping the payment, and whether the possibility of litigation is worth it. Employers should use caution (and consult with counsel) when considering these or other compensation tools to retain employees.
Dialing back the non-compete and non-solicitation obligations for employees–while keeping the company protected
There is a growing trend in the US to limit or even prohibit employee noncompete agreements. Several states now either ban employee noncompetes outright, or like Illinois, Massachusetts, Washington and Oregon, have limited the use of noncompete agreements for low-wage earners. To add fuel to that fire, President Biden’s July 9, 2021 Executive Order on Promoting Competition in the American Economy (which we blogged about here) encourages the chair of the Federal Trade Commission to “curtail the unfair use” of noncompetes and other agreements that may “unfairly limit worker mobility.” Though there has not yet been FTC rulemaking on noncompetes under the Executive Order, employees are noting the trend, and are demanding less restrictive- noncompete or non-solicitation agreements, or none at all.
The good news is that employers can rein in the restrictions in restrictive covenants while still protecting the company. Here are some options:
- Review and inventory existing “form” employee agreements containing restrictive covenants, and assess whether the restrictions are necessary for each position. In positions where there’s no real danger of employees “stealing the secret sauce” so to speak, consider removing restrictive covenants (but consult with counsel first!). And if implementing policy changes, employers should train HR on those modifications to ensure procedures regarding the presentation of employment offers and restrictive covenants for employees are aligned with the new policies.
- Amend compensation approaches / packages and on- and off-boarding procedures to allow for maximum protection of the company’s confidential information and trade secrets, and to curb unlawful competition without using noncompete and nonsolicitation agreements. For example, consider “golden handcuff” retention-based compensation structures to discourage the attrition of key employees.
- Consider implementing other viable strategies to suppress unlawful competition and protect confidential and trade secret information, including utilizing agreements that may not be as objectionable as noncompete or nonsolictation agreements-such as confidentiality agreements, trade secret agreements and invention-assignment agreements-as well as choice of law and exclusive venue provisions.
Though these choices may allow employers to increase retention rates, they don’t come without their own set of issues. Changes to compensation approaches can implicate wage & hour and tax issues, and employers should always be wary of changing compensation structures without first addressing possible pay equity or disparate impact issues. Employers should work with counsel as they walk through possible policy changes.
Making the company’s commitment to DEI clear to employees — instead of leaving them guessing
In a recent CNBC/Survey Monkey survey, nearly 80% of respondents said they want to work for a company that values diversity, equity and inclusion (DEI), and 60% of respondents said they approve of business leaders speaking out on social and political issues. But in a recent report by Advanced, only about half of survey respondents believed improving DEI is a business priority for their employers over the next 12 months, with 74% believing the main focus of their organization is on business growth and development and not DEI.
With so many organizations and leaders focusing on DEI-including over 2,000 CEOs who pledged in 2021 to support a more inclusive workplace environment through the CEO Action for Diversity & Inclusion™-why do so many employees think their employers aren’t committed to DEI?
Just a commitment to DEI isn’t enough to successfully retain employees. Companies also need to involve and engage employees in the process, as well as communicate with employees about the results of the company’s efforts. If employees aren’t kept aware of the company’s DEI goals, efforts and outcomes, the perception may be that the employer does not keep DEI front-of-mind-prompting employees to look for another employer who does.
Companies should check through these considerations to ensure their commitment to DEI is apparent to employees:
- How is the company formulating and broadcasting its overarching DEI strategy to its employees? DEI training and policies can appear piecemeal and disjointed if employees don’t understand the company’s overall DEI goals and strategy, but because DEI can be a sensitive topic, employers should work with employment counsel to ensure that messaging to employees is effective and appropriate.
- What is the company doing to gain “on the ground” insight from its employees? Anonymous surveys are a good way to get employee insight, but always check with counsel to vet the survey questions-many of which can be well-intentioned but problematic from an employment law perspective.
- What is the company doing to ensure consistency and controls in oversight as DEI policies are being implemented? DEI policies may be championed by some employees, and a sensitive subject for others. Companies can put themselves in danger of claims of discrimination if employee complaints are ignored or contained by managers or supervisors instead of escalated. Work with counsel to make sure proper controls are in place, and that HR, managers and supervisors are properly trained on escalation procedures.
- How is the company tracking data to ensure that the company’s DEI measures are bringing the desired results? Goals and an overall strategy are a necessary roadmap when it comes to championing DEI, but tracking data is the only way for a company to know whether the actions the company is taking are actually moving the company toward its DEI goals. Up-to-the minute data, including information gathered from pay equity audits, will tell the company whether policies and actions need to be fine-tuned and tweaked. Because data collection touches several sensitive areas, employers should work with employment counsel for guidance designing and implementing appropriate audits and other data collection methods.
Keeping a healthy work environment, because COVID is still here and wellness matters
Employee opinions on vaccination and masking during the COVID-19 pandemic have run the gamut. Regardless of where they stand on the transmissibility or virulence of COVID-19, most employees want to work in an environment where they can be both physically and mentally healthy. When their physical or mental health is threatened, employees have an incentive to take their contributions elsewhere.
COVID-19 is still here
The Biden Administration’s plan for employers with 100 or more employees to require employees to be vaccinated or regularly provide negative COVID-19 tests was blocked on January 13, 2022. (See our prior blog, here). However, employers are still required to provide workers with a safe and healthful workplace under the Occupational Safety and Health Administration’s (OSHA) General Duty clause, Section 5(a)(1).
Employers should think through these considerations while continuing to manage what seems like a never-ending pandemic:
- Determine and implement COVID-19 protective measures that work for their particular workplace-whether a mandatory vaccination policy, mandatory COVID-19 testing, or masks and social distancing. There are caveats, though. In order to avoid claims that employers have failed to provide a safe workplace, employers must be compliant with any state or local laws or guidance regarding COVID-19 protective measures that may apply to their employees, or customers, clients and vendors.
- Keep an eye out for any new state and local legislation, orders or guidance in response to the Supreme Court’s halt of the OSHA COVID-19 Vaccination Emergency Temporary Standard (and OSHA’s January 26, 2022 withdrawal of the standard) that may require employers to take additional protective measures-including orders issued by state OSHA plans covering private employers. Stay on top of new developments with our US 50 State Shelter-in-Place / Reopening Tracker, which identifies the relevant state-wide shelter-in-place orders and their related expiration dates, as well as the applicable state-wide reopening plans, in each of the 50 United States plus Washington, D.C.
Because COVID-19 safety laws and guidance are constantly changing, employers should consult with counsel before making any modifications to policies or procedures to make sure any desired changes are still within compliance of applicable law and guidance.
Employees are still dealing with the mental health effects of COVID-19. According to a recent survey report by LimeAde, “burnout” was the leading reason why employees quit their jobs from late 2020 into early 2021. The World Health Organization (WHO) identifies “burnout” as a syndrome that results from chronic workplace stress that has not been successfully managed, characterized by feelings of exhaustion, increased mental distance from or negativity about one’s job, and reduced professional efficacy.
How can employers help to combat this-not only for the well-being of their employees, but also to keep employees engaged and performing? Rolling out wellness programs can help. In fact, one study showed that employees who believe their employer cares about their health and well-being are 38% more engaged.
Some popular options for employee wellness programs include:
- Fitness / exercise programs and activities, including yoga and meditation
- Employee social groups (whether in-person or virtual)
- Accessible mental health counseling
- Nutrition education
- Group volunteer opportunities
Before implementing a wellness program, though, employers must consult with counsel. Wellness programs can raise a number of legal issues, including under Americans with Disabilities Act (ADA) (depending on whether health information or medical exams are involved), the Health Insurance and Portability and Accountability Act (HIPAA) the Genetic Information and Nondiscrimination Act (GINA) (if relating to group health plans), and the Fair Labor Standards Act (FLSA) (if, for instance, programs are not structured to be voluntary), to name a few.
The bottom line: employers have many tools to retain employees by keeping them happy and healthy in 2022- even in the current labor market, even in a seemingly never-ending pandemic-but one misstep could quickly bring employers out of compliance. Consult your Baker McKenzie employment attorney to navigate these retention tools and for all of your employment needs.