With inflation still skimming multi-decade highs, interest rates continuing to climb, and the reality of a recession setting in, CFOs are charting a course through very choppy economic waters. CFOs are balancing keeping costs down while maintaining productivity and attempting to grow the company, which can be difficult.
One of the largest expenses any CFO has to manage is human capital, which is why so many companies immediately resort to layoffs or salary reductions when the economy shrinks. But this course of action is a mistake — it harms employees, leads to turnover, and reduces productivity. These problems are made worse by a tight labor market, making it more costly and difficult to replace the employees you lose.
To avoid layoffs or salary reductions, CFOs should work with chief human resources officers (CHROs) to meet the needs of existing employees more cost-effectively and in a way that will improve morale and retention. By providing more flexible benefits and focusing on talent mobility, CFOs and CHROs can fully leverage their human capital and save money.
Reconsidering the ‘Cost’ of Your Workforce
Your workforce should never be viewed as a drain on your budget since a company is its people. Employees enable the innovation and productivity that grows the business.
One of the most effective ways to invest in human capital is to provide employees with flexible benefits. Companies often waste resources on one-size-fits-all benefits packages, such as paid time off (PTO), that many employees fail to use. When companies allow employees to repurpose this unused PTO for other priorities – such as retirement contributions, emergency funds, and health savings accounts – they’re ensuring that every dollar spent on benefits is actually supporting employees and their individual needs.
Our survey found that 90% of employees say benefits such as convertible PTO would make them more likely to stay with their companies. This prevents companies from absorbing the significant costs of finding, onboarding, and training new employees while improving the productivity of their existing workforces.
Flexible Benefits Help Sustain a Diverse Workforce
Employees’ financial goals and personal circumstances are never interchangeable, which should be a reminder that benefits have to be individualized. This is crucial at a time when companies are focused on supporting diverse workforces. Beyond the fact that representation is vital in and of itself, diversity is also critical for attracting talent. A Glassdoor survey found that over three-quarters of employees say a diverse workforce is an “important factor when evaluating companies and job offers.” Diversity also offers significant advantages in financial performance.
To give diverse workforces the support they need, companies have to offer benefits that are built around the specific concerns and priorities of all their employees. Our survey found that there are significant gaps in how diverse employees use PTO — nonwhite employees are 19% less likely to use all their vacation time in a given year, while women are 43% less likely to do so. When diverse employees are offered a chance to reallocate their PTO, they put it to different uses. For example, women are 33% more likely to want emergency funds than men.
According to Gallup, only one-fifth of employees say they’re engaged at work, costing companies huge sums in lost productivity every year. Gallup notes that employees would feel more engaged at work if their opinions were heard by their employers — especially around benefits. When companies have open discussions with all employees about which benefits are best for them, they will see dramatic improvements in retention and job performance.
Recognizing the Value of Flexible Benefits
When companies put their employees in a stronger financial position with benefits they can leverage, it’ll alleviate wage pressure as inflation persists and a recession becomes more likely. Meeting employees’ unique financial needs provides a vast array of other benefits such as increases in engagement and productivity, lower turnover, a healthier and more inclusive company culture (which will attract high-quality candidates), and higher morale at every level.
If employees aren’t taking advantage of the benefits you’re offering, it doesn’t just hurt them — it hurts the entire company.
Rob Whalen is co-founder and CEO of PTO Exchange.