There is a growing inequality in today’s labor market that is creating a two-tier workforce between a company’s employees and its contingent workforce when it comes to employee benefits.
Some would add contingent workers are being treated akin to second-class workers without access to benefits in contrast to the extensive, high-quality benefits afforded to full-time employees, although they perform the same tasks, according to John H. Chuang, CEO of Boston-based staffing company Aquent.
“That doesn’t mean an HR director wants to eliminate variable pay or a contingent worker,” he said. “There are obviously jobs where you’re going to hire someone for only a year. It’s OK to have a contractor and an employee work together. A flexible workforce is necessary to help American companies maintain their competitive edge.”
For Chuang’s company, that means offering benefits to contingent workers.
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It’s part of the changing consumerization of the workforce, which is leading employers to consider transitioning from a one size fits all approach to wages and benefits toward a model that aligns with employees’ diverse needs.
A Shifting Workforce
Driving this change of dynamics in the American workplace is a generational shift, an increasing interest in gig and remote work and new legislation establishing different employee classification metrics.
Consumerization refers to those in the workforce — more than half of whom are now millennials — who seek an employment experience that empowers them to make at least some of their own choices about tasks and goals, thus bringing a customer-like mentality to the workplace.
“They shop around almost like they’re buying a cell phone,” said Cowden Associates President and CEO Elliot Dinkin, whose company provides actuarial, compensation and employee benefits.
“As individuals and consumers, we’re used to setting our own goals and managing our own tasks, rapidly adopting the apps and tools that enable us to achieve what’s important to us, with ease,” said John T. Anderson, CEO of Smartway2, which provides workplace scheduling solutions for enterprises.
“Rather than putting up barriers that hamper autonomy and rapid adoption of new technology, organizations are now firmly focused on offering a seamless, consumerized employee experience so they can reap the benefits of increased productivity, collaboration and innovation.
“The 2020s will be the decade of autonomy at work and the mainstream adoption of tools that enable us to craft our own unique workplace experience,” he said. “These tools will rival consumer applications in ease of use and ability to sculpt human behavior.”
People Are People, Not “Resources”
Joseph Quan, co-founder and CEO of Twine Labs, which helps integrate HR data to deliver analytics and visualizations for CEOs and HR leaders, labeled consumerization as a fancy way of saying that every company will take a much more humanistic approach with every individual it interacts with.
“That applies to customers, partners, investors, candidates, and employees,” Quan said.
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“Forward-thinking companies are shedding the notion that people are just ‘resources’ or ‘capital’ — implicit in the terms HR/human capital — and that attitudinal shift is reflected downstream in the recent mania around candidate experience.”
Companies can position themselves by building a unique brand based on its distinctive cultural values and over-invest in candidate care and experience, said Quan.
“For us, that means sharing an incredible amount of internal data and communications with candidates before they even join the company,” he said.
Rather than imposing innovation from above, studies show employers should use surveys and group discussions to explore employees’ feelings about new technologies and elicit their help and suggestions through managerial collaboration for successful implementation, said Dinkin.
Dinkin, whose own workforce has mostly full-time and some part-time employees ranging in age from 20s to 60s, said each generation has different priorities regarding pay, benefits, time off, retirement, tuition reimbursement and other factors.
As the employee moves through the company, they can migrate to other packages based on their needs, Dinkin said.
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For example, a 24-year-old college graduate may not be thinking about retirement and may prefer to remain on a parent’s health insurance plan until they are 26 years old rather than obtain insurance through work, Dinkin said.
Some employees may want the option to pass on benefits and make as much money as they can, he said. Another employee may prefer more paid time off because they want to attend their child’s school or sports events or must care for an aging parent.
The Value of Benefits for On-demand Workers
In order for employers to set themselves up as employers of choice in a consumerization environment, Dinkin urges employers to be aware of these developments and consider enabling employees to design a package that fits company operations, is cost-effective and offers choices more aligned with individual career goals, life stages and ranking within the company.
Dinkin cites a recent Deloitte study of millennials in which 49 percent said they would leave their current job inside of two years while about 25 percent actually have done so.
“They’re a product of their education where they’re told the best way to get ahead is to change jobs,” said Dinkin. “They lack information as to what are actually their opportunities.”
It’s best to sit down with an employee and show them how their career ladders can intersect with a wage structure and show them the requirements necessary to move from an entry level position into a higher level and what they will make, he said.
Consumerization extends beyond a full-time employee to contingent and gig employees.
In hiring gig workers, an employer may be trying to save payroll taxes and some benefit costs, said Dinkin.
“Why wouldn’t I create benefit plans for those individuals?” he said. “Don’t I want to make them stick to my company?”
For example, they could be offered a health reimbursement account. “Let this class of employees go out and get medical coverage and reimburse them for a certain amount,” said Dinkin.
Aquent is a talent services company providing marketing and creative talent, managed services, extended workforce benefits, project management and professional development. In 1993 Aquent became the first staffing company to offer full comprehensive benefits to its temporary employees.
Its newly launched service, Square Deal, enables companies to offer equal benefits to their contingent workforce efficiently and at scale.
Aquent’s Square Deal offering includes benefits, policies and eligibility designed for variable work: full- and part-time and long- and short-term assignments that are on par with internal employee coverage.
Its benefits package combines health and dental insurance with accident, critical illness and hospital indemnity insurance; a wellness program; 401(k) or Roth IRA plans; flexible spending accounts for health care, dependent care, parking and transit; an identity protection plan; an employee discount program, and career development and online skills training.
The best and most productive talent has many options and seeks a reason to work for a company through consumerization, said Chuang.
Benefits provide that reason, he said.
“If you have a yearlong project where someone leaves at the six-month point, you don’t have time to hire,” he said. “It’s devastating. If there is no commitment to the employee, there’s no commitment for the employee back to the company.
“By giving benefits — especially since it’s so unique and different among contractors — they really value it. We found that offering a strong benefits package typically increases retention by more than 20 percent.”
Nick Patel is founder and CEO of Wellable, which offers customizable wellness solutions enabling employers to run an engagement program through wellness apps and wearable devices that includes gamification, rewards and incentives. Additionally, it provides education and consulting services on how to set up an office environment to promote wellness.
Such programs may be subject to failure, however, if employees are not keen on their employer being closely affiliated with their health, said Patel.
“It’s creating a culture about educating and letting employees know why the company is doing it,” he said.
The primary benefit to the employer in embracing consumerization is that it cuts down on the high cost of turnover with respect to recruiting, hiring and training, said Dinkin.
“If you’re in a client service business, people are leaving your accounts or if you’re an experienced person on an operating line and you’re leaving, it costs the company so much. Some of it can be measured and some of it can’t,” he said.
Another factor in becoming an employer of choice is that it affords a company to be more diligent in the way it supervises, manages and rates employees, said Dinkin.
“All of this attention to training, development, giving people multiple chances, and looking the other way because it’s so hard to find good people … what does that do to my culture? Is that the best way to run my business?
“You’ll just have a bunch of mediocre people slow down your company because the good people leave anyway. They don’t like that culture if they know you’re keeping around somebody who’s mediocre.”
When it comes to how consumerization benefits companies, Patel said that while return on investment was “strictly defined by the fact that if I invest this many dollars to try a wellness program, I should expect first to make dollars in health care savings,” said Patel.
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“We see the industry transition to this trend called value on investment, which is what we ascribe to,” he added.
Value on investment can be difficult to measure and will vary with each company, he added.
“It’s taken to other considerations beyond health care expenses,” said Patel. “Employees may be more productive, for example. Studies have identified millennials as buyers of more wellness benefits. It’s bringing those kinds of broader benefits to help their well-being in terms of determining the value on investment.”
That may help attract and retain talent, he said.
The consumer-in-the-workplace mentality can help raise employee engagement and smooth a path to ROI, but is a double-edged sword, said Dinkin.
The same dynamic found in retail — in which the customer experience is important in gaining an advantage and poor customer service leads to people not returning to the store — also is found in the workplace, said Dinkin.
Dinkin said the economic constraints such as a projected 6 percent increase in employer-based health care costs in 2020 makes it difficult for most employers to offer a significantly competitive advantage in terms of salary and benefits.
The differentiating factor is being a valued supplier to consumerized employees, making them feel they have a stake in the company’s success.
That will pay off in loyalty, retention, corporate agility and profit, he said.
