Employee churn remains high, and workplace leaders are looking for solutions.
According to the Bureau of Labor Statistics’ recent Job Openings and Labor Turnover Summary, 4.2 million U.S. workers quit their jobs in August of 2022. At that rate, 2.7% of workers voluntarily left their positions.
During the same period, 6.3 million workers were hired. Human resources and recruitment professionals everywhere face the challenge of high employee turnover.
The highest quit rates are in hospitality, foodservice, and retail, but construction and warehousing sectors are also seeing higher than average employee turnover.
Experts suggest multiple ways HR and company leadership can begin to improve employee retention — and make the most of an ongoing opportunity to recruit new employees and keep them.
Could an employee stock ownership plan help more businesses move the needle?
From a holistic perspective, studies suggest yes — employee ownership makes a difference. But is it solely the result of an employer-sponsored retirement plan, or is there more to an ESOP than meets the eye when it comes to recruiting and retaining quality employees?
Why Are Workers Walking Away?
Employers in many of the lowest-wage sectors continue to struggle in part because many workers have decided not to endure the working conditions and/or wages they lived with prior to the pandemic. Evidence suggests that pandemic-related stimulus payments and increased food assistance, a desire to protect children and vulnerable family members, and childcare needs all contributed to early pandemic quit rates.
But research also suggests attitudes about work are changing, and employees are looking for more than just a bigger paycheck. The initial stay-at-home orders of 2020 gave employees time to think, and many workers realized just how dissatisfied or burned out they were at the time.
For many who’ve made a change since then, a new job represents the possibility of overcoming their workplace challenges. Among the concerns employees are currently trying to address with a job search are the following:
- Stagnant wages versus inflation and rising cost of living — Many job seekers report that they’re able to negotiate a higher starting salary than they would receive as a pay raise in their previous role
- Professional development and fresh opportunity — Nearly half of those leaving their jobs are switching industries
- Flexibility — Some workers simply need greater flexibility to address family and childcare needs, while others are keen on remote and work-from-anywhere opportunities
- Wellness — From financial fitness to mental health, more employees than ever are looking for workplaces that support their overall well-being
How Ownership Culture and ESOPs Make a Difference
A bigger paycheck can be enticing, but is it enough to retain employees?
In fact, workplace culture can go a long way to help reduce turnover and attract new candidates. Employees want to work where they’re valued, protected from harm, and cared for as people — so that workers can care for their people.
And it turns out that ESOPs outperform non-employee-owned companies in numerous ways that employees find valuable:
- When the pandemic hit, ESOP companies retained more workers, did a better job maintaining hours and salaries, and were more likely to take steps to protect employees on the job
- ESOP companies are four times more likely to offer defined benefit retirement plans, and about five times more likely to offer a second diversified retirement plan, such as a 401(k) plan
- ESOP employees are more likely to say their employer encourages local volunteerism and investment in their local communities
- Workers at ESOPs report greater access to training (70% to non-ESOPs’ 48%)
- ESOP employees report higher involvement in company decision making
Helping employees build wealth is a key area where ESOPs outperform their non-employee-owned peers. According to a 2021 report from the Aspen Institute, ESOP employees at low to moderate income levels had ESOP accounts worth a median value of $165,000, compared with the national median household’s $17,000 in retirement savings. And ESOP distributions are far more equitable across racial, ethnic, and gender differences.
ESOPs haven’t eliminated wealth gaps, but they play an active, effective role in addressing systemic obstacles to equity. And that can matter as younger generations of workers increasingly say they care about employers’ roles in addressing social injustices.
According to the Aspen Institute, employee-owners of color earn 30% higher wages than non-employee-owners of color, and women employee-owners earn 17% higher wages than non-employee-owner female workers … among single women, the difference is 24%.
Could the Great Resignation Become a Great Recruiting & Retention Opportunity?
For employee-owned companies including ESOPs, it could — especially as many closely held U.S. companies change hands in the years to come. Baby-boomer business owners looking forward to their own retirements might consider an ESOP’s guarantee of fair market value for their business along with control over their own exit, on a timeline of their own choosing, as a smart exit strategy. The selling shareholder(s) can access the wealth they’ve built in the business to diversify in advance of their retirement, or to begin enjoying it earlier than they otherwise might.
At the same time, becoming ESOP-owned creates a new opportunity to establish and nurture a culture of ownership — one where employees enjoy a greater level of work satisfaction and engagement alongside higher wages, bigger retirement savings, greater workplace flexibility, higher productivity and growth, and social impacts job candidates care about.
Learn more about the benefits that employees are looking for, and whether your company is ready to offer them. Just click the link below to get the report.