A tight labor market and ultra-low unemployment rate has companies more stressed than ever about how to keep talented employees from walking into the arms of their competitors — but that doesn't mean they'll pay those workers much more.
Instead, HR managers and senior leaders are hoping employees won't mind forgoing raises if companies sweeten the fringe benefits they offer, according to a new report from PayScale, which surveyed more than 7,000 companies about compensation, employee engagement and retention.
Two-thirds of companies are concerned about losing their workforce, up from 59 percent last year, so this plan may seem counter-intuitive, but weighing equally on employers' mind are fears of a pending bear market.
"There is this uncertainty about the economy and a looming concern about a recession that is making many companies very cautious with their compensation budgets," Lydia Frank, vice president of content strategy at PayScale, tells CNBC Make It. "But if a company is being overly cautious and has retention concerns, this strategy of leaning into benefits might not be enough. Employees have a lot of options."
Companies appear willing to take that risk. Sixty-nine percent say they plan to increase base pay by 3 percent or less this year, and 19 percent are planning no increase, according to PayScale's report. An increase under 3 percent will likely just keep pace with inflation, which is projected to average 2.3 percent in 2019, according to Kiplinger.
After all, if the markets do go south, it is easier to roll back or modify benefit plans than it is to alter a person's salary.
"If you give a raise, you can't take it back. No employer would want to do that anyway because of what it does for morale and productivity," says Frank. "Benefits are easier to dial back or modify if a recession hits. Companies don't need to take anything away, they can just lower the 401(k) match, for example. But once you increase the compensation budget, you're stuck there unless you do layoffs."
But such reluctance to award raises following a banner year of robust corporate profits and lower tax rates might come as a shock to workers, whose wages, after accounting for inflation, carry about the same purchasing power as they did 40 years ago in 1978, according to Pew Research Center.
But the non-salary benefits workers can expect are likely far superior to what they'd receive in the 1970's.
To help attract talent in this competitive market, more companies are expanding beyond traditional benefit offerings of health insurance and retirement plans and focusing on improving employees' work-life balance.
A third of companies will offer paid family leave in 2019, up slightly from last year, and 9 percent of employers will give unlimited paid time off. Only 5 percent did so three years ago.
Perks that might be a little more self-serving for the company are also on the rise. This year, 44 percent of companies will allow remote work, up from 39 percent in 2018. While workers may love the added flexibility, companies might be leaning this way to save on office space costs, too.
Employers also plan on investing in staff training and development programs. Nearly 60 percent will offer this benefit in 2019, which will no doubt be a great learning opportunity for employees but also a way to reshape their existing workforce to meet the hiring challenges or labor shortages they currently have.
But the perk most workers will be excited about is still financial. To further offset tepid salaries, many organizations plan on rolling out or increasing bonuses. Companies seem to be hoping these extra payments will satisfy top performers, while affording them the same budget dexterity benefits do should rocky times arise.
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