HR Professionals’ Next Great Challenge

Economic & Job Market Perception vs. Economic & Job Market Reality

Over the last year the US job market and economy in general have regularly outperformed expectations, and yet consumer sentiment about current economic strength and stability continue to reveal a much more pessimistic outlook than the economic metrics would seem to indicate.

This piece from CNBC makes the case that inflation is largely to blame for the gap in consumer perception and economic fundamentals, but the more interesting point may be the similar disconnect between perception and observed reality with regard to the strength and stability of the job market.?

In terms of inflation, for example, even though the Consumer Price Index is at an annual rate of about 3.2% currently, which is quite tame by historic standards, consumer goods are still about 20% higher in price than they were in the early days of the pandemic just a few years ago.?

These trends are especially true for housing costs - both for rent rates and home prices - which is a problem further exacerbated by the relatively high interest rates that have been instituted in order to suppress those inflationary pressures.?

Currently, the median home price in the US is up more than 25% since 2019 while interest rates on 30-year mortgages average 7.83%, with the median age of home buyer now at 36 - the oldest on record in the more than 40 years that this data has been collected..?

In effect, even though inflation is now growing at a normal rate - albeit a slightly higher one that the Fed has claimed it would like to see before the current campaign of interest rate hikes hits its peak and recedes -? the previous inflationary spike remains priced into the current costs of goods, which is likely to weigh heavily on consumer sentiment for some time to come.?

When we look at the labor market, we see a comparable discrepancy between a macro analysis that is largely positive contrasted with a somewhat less flattering lived experience for many of the people that are navigating that labor market on a human scale.

From a big picture perspective, the US economy has added more than 2 million jobs this year already, and there are nearly 10 million open positions available for those seeking employment.?

That said, about 20% to 25% of those newly added jobs were in the leisure and hospitality industry which often offers limited advancement opportunities as well as lower pay and/or tip-based compensation that in turn can be quite sensitive to wider economic conditions.

That outsized growth in this industry is not surprising given the large number of leisure and hospitality establishments that have had to climb out of an outsized pandemic-related hole compared to most other industries, only returning to pre-pandemic employment levels as of August of this year.

As a result, even though the unemployment rate has been at historically low levels and new jobs are being added at an expectation-exceeding pace, long-term prospects from the perspective of many of those entering and/or attempting to move or advance within the current job market do not seem all that promising, which is why Census Bureau surveys of Gen Z and older Gen Alpha respondents indicate growing pessimism on these fronts.

In terms of what’s causing these disconnects, perhaps the metrics used to evaluate the job market and economy have not sufficiently tracked alongside changes in how the marketplace functions. Alternatively, perhaps those metrics have always glossed over some of the realities on the ground for those grasping at the lower rungs on the employment ladder, only now the proportion of the workforce who are operating at those levels has become large enough that the shortcomings of the resulting analysis are becoming harder to brush aside.

Whatever the cause may be, however, there certainly seems to be some space between how the economy and job market look from the outside and the bottom compared to how it looks from the inside and the top, which is worth keeping in mind when planning for the coming year.

Economic Outlook

New Jobs/Unemployment

US employers added about 150 thousand jobs to their payrolls last month, which was essentially right on target with what was forecast..

The US unemployment rate average inched up by one-tenth of a percentage point to 3.9%, marking the 19th consecutive month with a national unemployment average below 4%

Job Openings

The number of job openings held steady at 9.6 million in September (the most recent data available).

New hires were comparably steady at 5.9 million and 3.7% for the third month in a row, but that figure is down about 3.7 million from the almost 9.5 million hires registered in September of 2022.?

The South, which has dominated in terms of hiring rates for most of the year, was the only region to see a month-over-month decrease in its hiring rate - down one-tenth of a point from 4.3% to 4.2%.?

The West saw the largest increase in hiring rate, climbing from 3.2% to 3.4%, while the Northeast increased a tenth of a point to match the West at 3.4% and the Midwest held steady over the month at 3.6%.?

Separations

The total number of separations were down slightly from 5.7 million to about 5.5 million, but the difference was only about 150 thousand separations all together over the month.

The separation rate dropped a similarly small amount, decreasing by one-tenth of a point from 3.6% to 3.5%.?

Total quits were steady over the month at 3.66 million, while the quit rate hovered at 2.3% for the third month in a row and is not that far off the quit rate of a year ago at 2.6%.

There were also about 170 thousand more quits last month at 1.5 million quits than the month before, with the quit rate dropping a tenth of a point to 1%, as well, which is actually a tenth of a point higher than the 0.9% quit rate registered in September of 2022.?

Inflation

CPI for the last 12 months is at 3.2%, down almost a half a point from the adjusted 3.6% reported the month before.?

Employee Benefits

Employee Compensation In 2024

Through 2023 so far, salaries in the US have increased by an average of 4.4%, which is the fastest growth rate that’s been recorded in more than 20 years.

While projections show that rate slowing somewhat to 3.8% in 2024, it is worth noting that the same rate forecast of 3.8% was originally projected for 2023 before the expectation-defying job market remained hotter for longer than had been anticipated and led companies to increase compensation accordingly.

How closely will 2024 mimic 2023, remains to be seen, of course, but? it already is becoming clear that employees and employers will likely be going into the year with very different expectations about how it will play out on the compensation front:

• Employee Approach to Compensation Adjustments: Not surprisingly given the labor-favoring market dynamics of late, employees are expecting raises, with nearly 2 out of 3 workers planning to ask for raises at some point during the next year.?

In justifying their pay-bump requests, the most commonly claimed reason was inflation, which was cited by nearly 4 in 10 survey respondents, while a little less than 1 in 6 respondents simply felt underpaid and a little more than 1 in 4? believed they had earned their to-be-proposed raises as a result of having taken on additional responsibility.

Further raising the stakes of these negotiations, almost 1 out of 3 workers claim that they will pursue employment elsewhere if they do not receive the raise they seek.

• Employer Approach to Compensation Adjustments: Employers have a considerably different perspective on the wage negotiation environment, and are viewing 2024 as a potential opportunity to counterbalance some of the abnormally sized wage growth and bonus levels that employers relied upon through the pandemic and economic rebound in order to attract talent under abnormal circumstances.

From the perspective of many employers, those raises and bonuses represent anomalies that must be accounted for, corrected, and absorbed in subsequent years as they attempt to find the ideal equilibrium between employee satisfaction and profitability, whereas to employees those raises and salaries have formed new baseline expectations.

Attraction & Retention Competition

About half of all US companies intend to introduce new benefits and perks (46%) and increase starting salaries (51%) in the next year, which reflects in part the uncertainty about whether the job market will continue to soften in the coming year or whether the market dynamics will continue to favor employees.

Some potential areas of focus to consider addressing in order to improve your company’s attraction and retention prospects in 2024 include:

• Mental Health Prioritization: Burnout and stress levels are going up across the country - especially among women - and better access to mental health care is becoming an increasingly meaningful asset among a growing segment of the workforce that can also result in improved employee performance.
• Flexible Work Options: Remote/hybrid schedules and other flexible arrangements about when, where, and how employees work are more valued by employees than ever and can not only help attain top talent from among the more traditional workforce but can also enable companies to access entirely different talent pools that were otherwise inaccessible to them when the work options were more rigid.
• Cultural Compatibility: With younger generations now constituting a majority of the workforce, companies should proactively seek to shape internal culture inline with evolving sensibilities, including greater wage and salary transparency, fairness in employee treatment/expectations, and the potential for long-term job stability supported by the appearance of long-term company viability.
• Employee Benefits Education: One of the best ways to ensure that employees are both maximizing their benefits packages as well as understanding the value of those packages is to proactively and regularly educate employees about how to tailor the available offerings in order to best satisfy their individual needs.

Benefit Perception Gap

A recent report from Aflac indicates that there is nearly a 20 percent gap between the 78% of employers who claim that their employees are highly satisfied with their benefits package, compared to the 59% of employees who report high levels of satisfaction with those offerings.?

Further, more than half of responding employees (53%) expressed a willingness to take a job that has lower pay but better benefits.

While there are a number of different factors responsible for creating this perception discrepancy, two sometimes overlooked contributors are:

• Limited Benefits Understanding: One of the main issues creating the gap between employer and employee perception of benefits packages is the level of employee understanding about how best to optimize the benefits available to them in light of their own specific needs, which employers’ similarly overestimate.?

While nearly 8 out of 10 employers (79%) believe their employees have a sufficient understanding of the costs involved with various benefits offerings as a proxy for their worth or value, less than half of employees (48%) claim they have the required knowledge to navigate the benefits offerings and systems well, which indicates that by better educating and training employees on how to maximize the value of their benefits, employers may make significant inroads in closing that understanding gap.

• Limited Employer Trust: The rapidly falling proportion of employees who believe that their employers genuinely care about their well-being is likely related to the benefits appreciation gap, as well, assuming that employees who are skeptical of the existence of an employer/employee relationship beyond the transactional might also be skeptical of employer intentions and priorities with regard to benefit package design.?

With less than half of responding employees (48%) currently believing that their employer cares about their well-being, relative to the 56% and 59% of respondents who claimed such a belief in 2022 and 2021 respectively, clearly there is some work to be done in order to bridge this confidence gap, as well.

Top Tech Benefits

In many aspects of business, the tech industry has been at the forefront of numerous sweeping changes that have revolutionized commerce over the past half century, in part because the output that the tech industry produces, both in terms of hardware and software, have been the foundation on which much of the evolution of business has been built.?

While all industries and talent pools have their differences, of course, given how frequently current tech industry business practices become future business practices across industries far and wide, some of the following benefits and perks that are currently most effective at capturing the attention of tech recruits and employees may look familiar already, and some likely will soon:

• Office Amenities - For Both Remote and On-Site Workers: For in-office and hybrid workers, the prospect of commuting to a central location when required is made more appealing by providing perks like laundry services, a barbershop, free meals, and valet parking. In many cases housing, transportation, and relocation assistance is provided in order to make the process of getting to the office as convenient as possible, as well, whereas the company offers things like stipends to enable employees to set up a home office or gym and fulfill a similar purpose for remote workers.?

• Time Away From Work: In-office, hybrid, and remote workers alike need time away from work, which is why competitive vacation perks remain a crucial component of strong benefits offerings. Meta, for example, offers 4 weeks PTO for all employees, and an additional 30 days of PTO that can be used all at once after workers hit the 5 year employment mark to fully recharge their batteries, so to speak. Beyond PTO for rest and leisure, additional leave from work is essential for seeing to many of life’s non-work-related responsibilities, including caregiving and maternity/paternity leave, for which Meta offers 4 months on top of benefits providing complementary support including fertility and mental health care.?

• Ownership & Rewards: This third category involves aligning employee incentives and compensation, which is accomplished through a combination of bonuses and equity packages that directly link the financial benefit of both employers and employees.?

Meta, as another example, has also developed a system that enables new trainees to choose their own roles and placement from among a variety of teams across various divisions within the organization, which entrenches employee feelings of ownership over their work and autonomy about how and where to best put their skills to use for everyone’s mutual benefit.

Workforce Management

Effective Employee Feedback

Poorly executed employee performance reviews don’t just squander the potential for making positive change in your organization, but can also lead to negative outcomes including increased rates of employee attrition.?

To ensure that the feedback you are giving provides an opportunity to help workers grow within their roles and improve the effectiveness of their contributions to the organization’s overall goals, some of the main areas to focus your attention and efforts include:?

• Feedback Quality: Good, productive feedback empowers employees to take specific action in response to a specific critique. Focus on behavior and/or work product that you can point to as examples of where the requested adjustment is needed, and avoid feedback that addresses personality traits or vague qualities that the employee has no actionable recourse to address.?
• Feedback Content: In addition to constructive criticism designed to shape employee output, constructive praise should be provided in equal measure (i.e. praise designed to reinforce positive employee contributions, ideally providing greater insight into how the employee’s efforts positively impacted the larger company goals outside the employee’s general purview).?
• Feedback Timing & Timeliness: Opportunities to provide feedback should occur both on regularly scheduled intervals (e.g. monthly/quarterly check-ins, annual performance reviews, etc.) as well as at the conclusion of projects, in the wake of operational changes, and/or in response to other events that require feedback to be shared. While unscheduled feedback opportunities will not occur at regular intervals, they should nonetheless occur consistently so as to be regularly expected.
• Feedback Investment: The ability to analyze performance and provide productive feedback are skills that are best developed through the combination of education and experience. Not all managers may be as naturally gifted at these particular skills of course, but all can benefit from additional training opportunities, exposure to good role-modeling, and the receipt of feedback on their own feedback giving performances.
• Feedback ROI: More than just better aligning each employees’ work with the company-wide mission and improving productivity and output quality, providing better feedback is actually directly linked to employee job satisfaction and retention, with one survey indicating that employees who receive low quality feedback are about 68% more likely to leave the company and look for work elsewhere than employees who receive good or even average quality feedback.
• Feedback Loop: The highest quality feedback isn’t a one-way street - it requires that employers also solicit information from their employees with regard to their own assessment of their work output, the contributions they believe they are making, and their aspirations within the company, so as to make sure that the employer-provided feedback is both accurate and being delivered in a way that a given employee is capable of processing and responding to accordingly.

Holistic Risk Management

In order for organizations to effectively manage the variety of evolving risks that threaten to disrupt their ability to function, risk management responsibilities can not fall solely on the shoulders of risk managers or even entire risk management departments, but must become a shared responsibility across the entire company team.?

Fortunately, there are a number of different steps that organizations can take in order to build a more comprehensive, cooperative risk management framework that is better suited to meet the needs of the current risk environment, including:

• Creating Formal Processes & Protocols: Clearly-outlined processes, protocols, and controls must be synchronized and enmeshed into all levels of company operations so that risk can be prioritized and addressed systemically.

• Establishing Clear Governance Structures & Enforcement: In order to ensure that risks are properly identified, assessed, and handled by the appropriate decision-makers, employees must have clear understandings about how those processes, protocols, and controls function, as well as what to do when they encounter uncertainty about how to address a given risk, and employers must have governance structures in place to provide oversight and accountability when communication breakdowns occur and/or performance expectations are not met.

• Investing in Risk Management Infrastructure: The processes, protocols, and controls shaping risk management as well as the governance overseeing it all depend upon data collection/analysis and communication systems to inform decision-making and link the array of roleplayers that make up the company’s risk management network.?

• Promoting Risk Management Culture: Perhaps the most important precondition for creating a risk-management optimized work environment is to set a tone that prioritizes risk management, including accounting for risk-management activities in work output targets and providing additional training and education that incorporate real-life case studies and simulation exercises.

Unfulfilled Workers - Unaware MGMT

Some newly released research indicates that workers are not only feeling unfulfilled on the job, but they also overwhelmingly share the belief that senior leadership at their company is out-of-touch on these issues.?

According to the analysis, about 3 in 4 workers are becoming disengaged as a result of work conditions and expectations.

Further, only about 1 in 4 employees thinks that management has a sufficient understanding of what leads them to look for a new job or stay where they are, while most managers believe that the opposite is true.

According to an executive with one of the survey partners, the hassle that comes with finding a new place of employment is the primary obstacle that is keeping many workers in their current jobs, while management exist in what they dubbed a “thriving bubble” where the company mission is clear and employees feel some sort of collective purpose in pursuit of it.?

As the research ultimately made clear, purpose and meaning were two of the factors that most closely correlated with strengthened employee loyalty - more so than even factors like day-to-day on-the-job experience or compensation.

That said, the survey also seems to show that the biggest barrier preventing workers from finding more of the purpose and meaning they seek within their work is leadership that is tone deaf, preoccupied, and unaware of how their efforts to create common purpose sometimes miss the mark.

Legal/Compliance?

2022 EEO-1 Submissions Deadline December 5th

Data collection is open for 2022 ?EEO-1 Component 1 filings with the deadline for submission swiftly approaching in just a couple weeks on December 5th, 2023.?

These reports are part of a mandatory annual data collection process which legally requires all employers with at least 100 employees and federal contractors with at least 50 employees to provide certain information about their employees to the Equal Employment Opportunity Commission, including employee demographics and job categories.?

The Filer Support Message Center, which is a help desk that provides support and assistance? to help people submit filings online, is open as well to help facilitate the submission process.

Secure Act 2.0 Takes Effect January 1, 2024

The Secure Act 2.0, which was signed into law in the closing days of 2022 and will take effect at the beginning of the new year, ushers in some sweeping changes to retirement planning and savings administration in the US, including:?

• Mandatory 401k Enrollment: Most companies with more than 10 employees that have been in operation for at least 3 years will be required to automatically enroll employees into their 401k plan with between 3% and 10% automatic contributions. There’s also a tax credit available for many companies to cover the additional administrative burden of automatic enrollment.
• Starter 401ks With No Employer Match Requirement: The expense of matching employee contributions has deprived many employees over the years of the benefits of having a 401k account even in the absence of matching employer contributions, which should no longer be an issue under the new law.?
• Increased Catch-up Contributions: The amount of annual contributions that employees can begin putting into their 401ks at age 50 is being increased by 50% from $6,500 to $10,000, and that limit is now indexed to inflation to ensure it keeps up with the cost of living.
• Increased Emergency Savings Account Flexibility: Despite more than 4 in 10 US workers expressing a desire to be automatically enrolled in an emergency savings account program through their employer, only about 1 in 10 employers offered such an opportunity as of 2022. The Secure Act increases the flexibility and ease with which employers can now offer such account via withholding as much as 3% of opting-in employees’ paychecks up to $2,500 to be placed into said emergency savings accounts, from which employees can then withdraw their money untaxed up to four times a year with no penalties whatsoever.?

Tech?

Are Virtual Meetings Counterproductively Boring?

New research published in the Journal of Occupational Health Psychology indicates that some previously held beliefs about how employees respond to virtual meetings may have been wrong.

While many people who have experienced a virtual meeting can attest to feeling some degree of fatigue during the process, earlier studies on the phenomenon seemed to suggest that mental overload - presumably stress from using new technology and/or performing on camera - was predominantly responsible.?

A team from Aalto University, however, conducted both ethnographic and physiological research, including measuring the heart rate variability of participants across more than 400 meetings (both virtual and in-person), and found the opposite to be true. According to their findings, fatigue during virtual meetings was being caused by a lack of mental stimulation - a condition otherwise sometimes known as boredom.?

Some interesting insights from the research include:?

• The research team found that whether the meeting was in-person or virtual made little difference to employees who are on the upper ends of the work engagement and enthusiasm spectrums, whereas the employees who claimed to be less engaged with or less enthusiastic about their work found maintaining their focus during virtual meetings to be much more of a struggle.
• The drop in maintained-attention during virtual meetings can be especially steep for employees with lower baseline work enthusiasm/engagement in part because of the limited sensory input and interaction cues they can intercept through a video format.?
• The effect can be particularly pronounced when video chat is turned off, which?

exacerbates the understimulation problem and will often lead affected employees to multitask in order to compensate for the stimulation deficit. While not all multi-tasking activities are equality taxing and some require very little mental exertion while staying engaged with a virtual meeting at the same time (e.g. walking on a treadmill or playing with a fidget spinner), most attempts at multitasking lead to missed information, an exhausted brain, or both.?

Telemetrics & Reducing Insurance Expenses

Telemetric technology and usage may have hit a tipping point in the commercial auto insurance space, though the private auto policy side of the business has lagged behind.

Looking at some of the causes for telemetric adoption reluctance may provide some insight into how companies can best prepare for and utilize these technologies to improve risk management and bring down their own commercial insurance costs as telemetrics become increasingly ubiquitous and available across more and more industries/functions:

Two of the primary sources of reluctance to adopt telemetrics are:

• Unfamiliarity & Resistance To Change: On the personal auto coverage side of the equation, many people have displayed a general wariness about having their actions recorded and evaluated by a telemetric device, and that wariness ultimately outweighs the prospect of reduced insurance expenses.

Professional drivers, who are on-the-job and typically utilizing company property when they are driving, tend to be more comfortable with the notion of being monitored and may already be subject to inspections like weigh stations and location tracking, so the transition to telemetric devices was a much smaller and more manageable leap.?

With that analogy in mind, where does your company employ data collection technology and how might the addition of telemetric data collection and analysis at these existing data collection points be interwoven into your risk-evaluation system in order to make the transition to better risk-monitoring and exposure-reduction as seamless as possible??

• Technological Incompatibility: Even among forward looking companies who like the idea of incorporating insurance-aiding telemetrics into their operations, another frequently encountered hurdle is trying to get existing technologies and platforms to accommodate the new telemetric workload in a way that insurance companies can translate and utilize for risk assessment purposes.?

For example, in industries that involve the management of fleets of commercial vehicles, some companies collected driver data through hardware that gathers information directly from the vehicle itself while other companies have relied more on driver-input data or non-vehicle-connected third-party monitoring devices like cell phones.?

Further, while some companies may issue company phones to drivers and collect data through an application downloaded to the phone, other companies don’t issue cell phones to drivers and therefore can’t require them to download the app onto their personal phones. There can also be a great degree of variability in data quality between the various devices/programs used and insurance carriers have yet to be financially incentivized to solve all these problems themselves given the high-cost and difficulty of developing a one-size-fits-all solution.

As these technologies continue to evolve and as your company adopts additional data collection methodologies, processes, and devices for non-insurance-related purposes, it may be worth inquiring as to which of the the technologies you are considering is best equipped to potentially share that information with third parties like your insurance company when doing so becomes advantageous.?