How to Hire and Retain During the “Big Quit”

Almost daily, my employer clients are telling me about their inability to hire workers to fill job openings in the Texas Panhandle. This local trend reflects a nationwide problem. The Bureau of Labor Statistics just reported last week that 4.3 million people left their jobs in August 2021, the highest “quits rate” since the BLS started tracking the numbers in 2001.  

Industries that were most affected by this high quits rate in August included hotels, bars, restaurants, retail, manufacturing, construction, healthcare and education. The media has dubbed this as the “Great Resignation” or the snappier “Big Quit”.

We knew this was coming even before the BLS released that report on October 12. Surveys by Microsoft and by the Society for Human Resource Management earlier this year both found that 40% of employees say they have or will quit their jobs in 2021. That’s double the number in 2019, just before the pandemic.

There are lots of reasons why employees are participating in the “Big Quit” and employers are having such a challenging time filling open positions. But the reasons are not solely, or even chiefly, related to government handouts. Ending the federal supplement to unemployment in Texas and other states at the end of June 2021 didn’t create any improvement in employers’ ability to hire. In fact, the recent BLS numbers showed that employees walking away from their jobs markedly increased after the unemployment benefits expired.

Reasons for the Big Quit

The reasons for the Great Resignation seem to be related to what employees discovered about themselves and their jobs during the pandemic:

  • More than four million Americans dropped out of the labor force entirely during the pandemic, particularly women and workers over 55 years old. They had reasons ranging from childcare duties, to early retirement, to concerns about contracting COVID. Sixty-eight percent of workers who told SHRM that they were going to quit their jobs in 2021 said that they decided to make a change during the COVID-19 pandemic. Extended time at home has convinced many workers that they are dissatisfied with their current career and would rather transition to being a stay-at-home parent, pursue a new educational opportunity, look for a better job or retire.
  • A huge wave of Baby Boomers retired, many because of unpaid furloughs during the pandemic. But a year later, even more are retiring, reporting that they have reached the point of exhaustion and will be happier if they leave the workplace altogether, even if it means a less healthy retirement income. The estimate is that 10,000 Boomers retire each day in the US, and because the following generations are smaller, finding and retaining replacements for the Boomers is proving difficult and a long-term problem, projected to continue for the next 10-15 years.
  • Restaurant staff, grocery store employees, delivery drivers, heathcare workers, teachers, retail workers and others reached their breaking points. “Throughout the pandemic, essential workers – often in lower paid positions – have borne the brunt of employers’ decisions. Many were working longer hours on smaller staffs, in positions that required interaction with the public with little to no safety measures put in place by the company and, at least in the US, no guarantee of paid sick leave. It quickly burnt workers out,” concluded a BBC report.
  • Low wages are a hugely motivating factor in the Great Resignation. The federal (and Texas) minimum wage hasn’t increased above $7.25 since 2009, even though the consumer prices have. An item that cost $7.25 in 2009 now costs $9.27 in 2021. Employees who make these minimum wage know that they sink further into poverty every year, and they are running away from low paying jobs as fast as possible.
  • The SHRM survey found that 53% of the people leaving their jobs in 2021 did it for better compensation. Employees who are stressed and in low satisfaction jobs with irregular schedules like food service don’t have to perform that work anymore for the low wages that employers were paying before the Big Quit. “Workers’ wages are rising at the fastest pace in years, due largely to structural shifts in labor markets, talent supply challenges and potential inflation.  Research shows 72% of companies are updating pay and benefits programs in 2021 to address multiple challenges”, according to Forbes.  

This kind of massive reorganization of the labor market happens after world wars and economic recessions. The COVID pandemic has apparently created the same type of seismic shift where it is a seller’s market for employees to demand and receive better employment perks in exchange for agreeing to perform the work.

So what should a Texas Panhandle employer do to improve recruiting of employees for all those open positions in 2021?

Consider Your Compensation

Most importantly, take a very hard look at your compensation structure. You cannot hire anyone with a high school education for less than approximately $12 per hour for any job in Amarillo now. I have fast food clients offering $12 per hour for part-time workers who have no particular experience or qualifications. And those jobs are still slow to fill.

And it is about to get worse. Amazon’s distribution center will open its doors in Amarillo in the first quarter of 2022. It is offering 500 full-time jobs to workers with nothing more than a GED and the ability to speak English. The minimum starting salary for those jobs is $18 per hour with full benefits. Yes, it is demanding work that may not suit some employees, but so are most construction, fast food, hospitality and even healthcare jobs.

And Amazon is not the only choice of employers that local workers have. Walgreens, CVS and Walmart all have hourly minimums of at least $15 per hour at all stores, including in Amarillo. And now Walmart, Amazon and Target are also offering their employees college tuition and textbook reimbursement perks.

You may not believe that Walgreens or Amazon is your competitor, but when hiring and trying to retain employees, anyone who hires workers with similar skills is a competitor. Many businesses need basic laborers. But now those laborers know that better paying positions exist locally at employers like Amazon and Walmart.

And as news reports emerge about Amazon paying $18 per hour to entry level employees, it is not just positions requiring minimal education that you need to worry about. What are you paying your receptionist, your accounts payable clerk or your assistant store manager? If it appears that you value your experienced clerical employees less than Amazon values completely inexperienced warehouse employees, what do you think that will do to your employee retention rates?

While salaried and degreed workers are also threatening to resign, the labor shortage is most acute in lower-paying positions that don’t require four-year degrees. So I advise Amarillo companies:

  • Review any job paying less than $18-20 per hour and determine whether you will you need to raise that pay to keep those employees or attract new ones.
  • And as part of this compensation review, if you own a restaurant, reconsider the tip credit. Yes, that would mean raising your food prices (fast food restaurants have already done so) and paying at least $7.25 per hour to all of your servers and then letting them keep their tips, but it may save you tax, labor audit, hiring and retention headaches in the long run. Maybe that choice is not the right one for your restaurant, but you need to at least weigh the possibility.

Improve Your Paid Time Off

Also look at your paid time off (“PTO”) policies. I know many employers in the Texas Panhandle who offer no PTO in the first year of employment. This is a mistake. Employees, particularly those under 40, are very interested in working for a more flexible employer.

Every full-time employee, even a new hire, has emergencies with children or elderly parents, car repairs, and other unexpected problems arise that require occasional time off from work. Having pay docked to handle the occasional family issue quickly makes employees very dissatisfied with their jobs. Yes, a few employees may abuse this PTO, but good employees will actually look for and stay at companies that offer reasonable time off policies.

What is reasonable in Amarillo, Texas? It actually still very minimal. To be considered a good employer here, you need to offer at least:

  • 5 days of PTO to new employees during the first year, and
  • 10 days of PTO after their first anniversary at your company.

Do you really want to retain your best employees over the long-term? Then up that PTO promise to at least:

  • 15 days on their fifth anniversary at your company, and
  • 20 days on their tenth anniversary.

At this point, this flexible paid time off is more important than health insurance to many local employees, some of whom are used to going without health insurance in the Texas Panhandle because they have been making that sacrifice for years. But if labor shortages continue and any other companies emulate Amazon and start to provide good health benefits, by this time next year, your company may have to consider improving your insurance offerings also.

Listen to Your Employees

Finally, don’t listen just to me. Yes, I advise and regularly talk to scores of employers in this area. But no one knows the issues affecting your workforce like your own employees.

  • Do an exit interview of any departing employee to really analyze your compensation, benefits, leave policies and workplace culture from their perspective. You may hear some things you don’t want to hear, but that is always the first step to improvement.
  • Also, take the time to ask and listen to your current employees about their employment frustrations, their compensation concerns and their lives. Ask them if they would recommend your company to family and friends as a great place to work and if not, why not?

You may be able to retain more workers and have to recruit less often if you will consider your employees’ perspectives. Then make some changes to navigate this strange new employment world, rather than just relying on “how I’ve always done it.”

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