Is The Ongoing Labor Shortage Affecting Your Clients?

A recent report from The Department of Labor suggests that there are over one million more jobs available in the U.S. than people who are searching for them. Unemployed laborers are, therefore, becoming more selective when choosing a new job. Industries that have been hit hardest by the labor shortage include those that have hourly, lower income workers. To remain competitive, employers are now having to increase wages and benefits.

We also know that even outside of today’s economic climate, employers operating in industries with high hourly and part-time populations (restaurant, retail, gas stations, convenience stores, etc.) experience high turnover and challenges retaining employees. For these employers that struggle with the high cost of health insurance, The American Worker provides benefit solutions that are both attractive to potential employees and affordable in cost.

Offering a benefit plan can help employers who have been affected by the labor shortage attract and retain employees, resulting in less expense on onboarding and training. Below we’ll look at how combining an American Worker benefit package with an employer contribution strategy can help attract new employees, retain existing employees, and provide savings for the employer.

The following case study information is based on an existing American Worker client; we’ll call them “ABC Company.”

The CFO of ABC Company was struggling with the onboarding costs of their high-turnover employees. The company was onboarding 22,000 new hires each year, even though they only had 18,000 active employees, meaning they were operating at a 122% turnover rate. More specifically, 11,000 of those new hires would be lost within the first 90 days and another 4,000 would be lost within the first six months. The average cost of onboarding being $2,200, the company was spending over $48 million on onboarding costs annually.

In order to target employee retention at the milestones during which turnover was most likely to occur, ABC Company implemented an American Worker benefit plan and a specific employer contribution strategy. On day one of employment, employees were offered the benefit plan with a small employer contribution. The employer contribution would then increase at 90 days, and again at 6 months of employment. With 2,500 total active participants in the plan, the company’s annual benefit expense (about 50% of a $100 monthly rate) was about $1.5 million.

Our benchmark shows that in most hourly environments, employees with benefits stay enrolled and therefore, employed, for an average of ten to fourteen months. If the average turnover milestone for ABC company is six months without benefits, adding benefits will double retention. In turn, this reduces the number of new hires each year from 22,000 to 20,000, providing a 10% reduction in annual hiring. This resulted in a decrease in new hire cost from $48.4 million to $44 million. When the cost of benefit spend is factored in, the overall annual savings to the employer is about $4.4 million.

This is just one example of dozens of clients for whom we have employed benefit and contribution strategies to help them retain and recruit more employees.

For more information, please contact The American Worker team at or call us at 1-800-551-3424.

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