Businesses have gotten creative to meet their employees’ compensation desires.
Tasked with tight margins and the need to offer competitive compensation plans, many businesses have emerged from the recession to forego the once-commonplace annual raise in favor of offering more bottom line-friendly benefits.
Government data shows companies’ spending on benefits has climbed 16 percent since 2004, compared to only 2 percent on wages, The Washington Post reports.
The shift helps provide an explanation for something that has puzzled economists in the years after the financial crisis: the country’s stagnant wage growth. For the past five years, wage growth was stuck at roughly 2 percent—even as unemployment dropped. Spending on benefits now actually outpaces gains in wages, so much so that bonuses and other awards are at the highest level in more than three decades, according to an analysis by consulting firm Aon Hewitt.
Money Doesn’t Buy Happiness
The creative, and often cheaper, employee benefits include:
- Bonuses
- Tuition reimbursement
- Increased vacation time
- Free gym memberships
- Commuting subsidies
- Pet health insurance
“I think it’s a good thing to consider creative ways to reward employees that can also incentivize employees,” says Beth Milito, Senior Executive Counsel of NFIB’s Small Business Legal Center. “It’s a win-win for workers and business owners.”
That’s especially true for small businesses, which have had a harder time recovering from the recession than bigger companies.
“Annual raises aren’t possible for some companies,” Milito says. “But there are other more economical ways to still get money in the employee’s pocket without boxing yourself in with an annual raise—something that companies are eager to do if they can afford it.”
While getting creative can certainly ease some burdens, Milito cautions that business owners should still be cognizant of meeting wage and hour laws, like with flexible time. For businesses looking to potentially shift their compensation structure, Milito recommends consulting with a professional tax attorney or CPA to ensure new offerings are legal.
To learn more about compensation and benefits, head to the NFIB Small Business Resource Center.
