Attracting, Retaining Hourly Employees Still A Problem

May 7, 2002
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GRAND RAPIDS – Grand Rapids-area employers are still finding it hard to attract and retain qualified hourly employees even though they have significantly increased wages.

Turnover has been on the increase over the last three to four years as the labor market has tightened up, and the fact that there are more jobs than ever to choose from means employees can literally walk away from a job today and have another job tomorrow.

“Employers are having trouble finding people in the first place and they have to really work hard at retaining employees once they have them. Retention is very important to employers right now,” said Rob Strate, director of member services for The Employers’ Association, a human resource organization with more than 550 members in West Michigan, predominantly in Kent and Ottawa counties.

The entry level, hourly wage positions, particularly in manufacturing and the service industries, are the hardest to fill because of the unavailability of people in the current labor market with the basic skills required for the work, Strate said. Although the salaried, middle management positions are often the first to go when companies restructure or downsize, it’s typically the lower level, hourly positions that tend to be the most critical to a company.

When there was a pool of unemployed people who had some experience, employers had the luxury of choosing among several candidates and picking the best one, but these days they have to hire whoever they can get -- even though they may not have the skills the company really wants. Then employers are forced to do a lot more on-the-job training and orientation to get people up to speed, Strate noted.

The minimum wage is now $5.15 an hour, but virtually no employer would think of offering that because even the fast food restaurants pay more, he added.

“We’ve definitely seen an escalation of the entry level hiring rates in this area over the last two or three years. We’ve seen entry-level hiring rates go up to $7.50, $8 and $9, and in some cases $10 and higher,” he observed. “What usually happens is that some of the larger companies around – manufacturers in particular – will decide to start hiring at say $10 an hour. That creates problems for other area employers because unless they can get close to matching that, they’re going to lose out. That’s a big problem.”

Many area employers are trying to attract people to their door with higher wages and more complete benefits. Getting employees in the door and trained is a huge expense, and companies can’t afford to lose that investment. According to The Employers’ Association, the cost of hiring, orienting and training a new employee, on average, is $3,000 to $5,000 to fill an hourly production position and $7,000 to $10,000 to fill a salaried position.

“You really can’t afford to make a mistake when it’s that expensive. Again, it just points out how important it is to keep these people after you’ve made the investment,” Strate stressed.

Years ago, not many companies offered 401(k) savings plans. But most do today, and many companies, like Grand Rapids-based VKW Hardwoods, take it a step further by providing a company match. Employees must work for the company for 120 days to be eligible for a 401(k) savings plan. Traditionally, employees had to work for the company a full year before they became eligible, but VKW Hardwoods changed its eligibility requirement because the plan has become such an important part of the total compensation package, said Human Resources Director Jean Mulford.

It’s one of several incentives the company is offering to combat high turnover and costly retraining of replacements. VKW Hardwoods, which employs 100 people at two locations, also uses an attendance incentive as part of its employee compensation package. It’s a monetary incentive automatically paid out weekly as a part of regular wages but forfeited if an employee is tardy or has an unscheduled absence that week. Additionally, VKW uses a production incentive as a way to reward dedicated workers.

“If the crew really works hard and meets production targets, it has a direct impact on their weekly paycheck,” Mulford explained. “The production targets are set by machine crews and for the percent of the standard that they achieve, they get a production incentive over and above their base rate.”

Another retention tool VKW employs is an open line of communication. The company sends out a weekly newsletter along with paychecks and conducts monthly employee meetings, known in VKW circles as the “Great Huddle,” in which employees are treated to lunch, updated on company business and invited to share their ideas and concerns.

The Employers’ Association is seeing more and more companies struggling with a communication gap of a different sort.

Hispanic workers represent the greatest influx of potential employees that area companies have seen in recent years. Area companies are employing more and more Asians, Vietnamese, Laotians, Cambodians and Bosnians, as well. For the first time, The Employers’ Association is holding Spanish classes for English-speaking supervisors, group leaders and managers to help them overcome language barriers.

“There is no way we can grow employment here in West Michigan without bringing people in from outside the local labor market,” Strate said. “The percentage of the people participating in the labor market who actually live here is as high it’s going to get, and the only solution is to bring new people into this labor market.”

The forecasted economic slowdown will undoubtedly impact the employment situation. Strate thinks in the next two or three quarters a fair amount of companies in the area will begin laying people off, so more people will be available to companies looking to grow their employment. He’s aware of a handful of companies in West Michigan that are already anticipating cutbacks, but declined to name them.

“I think the people who are laid off will be able to get back into the labor market quickly if they want to,” he added.

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