In all transparency I am not (nor do I profess to be) an economist nor human resources professional. With that made clear, I regularly interact with clients in industries where skilled labor workers are the backbone of the company. I am consistently hearing from these companies that they need more qualified workers, but either: can’t find people, can’t get their new hire to show up on the first day, have their new hire stop showing up after a week, are struggling to keep the people they have, or are finding out that the wage rate they need to offer a new employee is significantly higher than what they are paying their current employees. This phenomena is not industry-specific, but rather is far-reaching. Paycheck Protection Program (PPP) loan funds or other stimulus money are allowing some to put band aids on the problem, but there are still longer term solutions needed in order to attract quality employees to businesses. Even though I acknowledge that I do not have a crystal ball with the secret answer to make the problem go away, I would like to share some food for thought on the current challenge.
The latter part of 2020 and the beginning of 2021 have seen government stimulus money being spent at levels not typically seen. While this stimulus money has been the life-sustaining blood to many segments of our Lancaster County population, for many businesses and individuals the inflow of money has allowed spending on items or services that are above and beyond normal. This has driven demand for goods and services.
There is an extremely tight labor market for the skilled labor workforce. The Conference Board reports the supply of workers for these jobs has been shrinking and expect it will continue to shrink. This workforce has realized their value, because they are valuable! Currently, demand for skilled labor is higher than supply, while inflation of wages is on the rise.
A Few Suggestions
The problem is vast and far reaching. With that perspective, here are three suggestions/solutions for you to consider.
- Research shows that more and more employees care more about hourly rates and bonuses/incentives than they do benefits (retirement/health insurance/vacation…). Acknowledging you can’t just change 401K matches/Profit sharing plans and health insurance contributions/plans, consider how you can start reallocating costs traditionally set aside for benefits to allow for greater spending on compensation.
- If you are in an industry that generates revenue based on labor rates and hours worked, consider increasing labor rates…by more than 3%.
Maybe you just increased rates recently. You probably need to increase them more. Your competition is probably in the same predicament as you and needs to raise their rates as well. If this is what you need to do, don’t wait.
It is easy for me to sit here on the sidelines and make it sound like increasing rates is easy. I acknowledge it is not.
- Take care of the employees you have. Value them. Make them feel valued.
If this blog strikes a chord, you are not alone. Think proactively to set yourself up for the long-term. Let us know if we can help with projections to see the financial impact of different scenarios.
By Ben Ritenour, CPA, CGMA, Senior Manager
This installment is brought to you by Ben Ritenour. Ben is a Senior Manager in the Walz Group’s Assurance Division. His broad range of expertise supplements the firm’s traditional offerings. Not only does he oversee compilation and review engagements, but his hands-on experience in private industry allows him to perform a variety of consultative services for clients, including outsourced CFO services and bank examination procedures.
Ben is a member of the American Institute of Certified Public Accountants (AICPA).
Connect with Ben on LinkedIn or contact our office to get in touch.
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