Lending has traditionally followed this simple value proposition: “I’ll give you something of value today, and in return, you’ll give me something of value (and a little more) in the future”.
We’re seeing an interesting spin on this model playing out in labor markets. There have been substantial shortages of labor in certain industries over the past few years. The rise of remote work, COVID protocols, and other factors led to “the great (employee) reshuffle”. It’s been increasingly difficult for many companies to find and keep talent; It takes companies 18% longer to fill open roles compared to pre-pandemic. Despite the slowing of the economy, job vacancies hit an all-time high recently.
Churn, Churn, Churn
Labor mobility has increased, and the fundamental relationship between employers and employees has weakened. Nearly half the country is looking for a new job currently , with a salary increase of as little as 5% sufficient to entice workers to shift employers. There have also been many industries that have been harder hit than others; more than 60% of employees who quit jobs in the retail/service and finance/insurance industries have either switched industries or left the workforce entirely. For industries with a remote workforce, advances in technology have actually encouraged employees to think about employment elsewhere; if ‘one zoom call looks like any other zoom call’, there’s little emotional attachment keeping many employees around.
All this churn and structural labor shortage has led to substantial expense for many employers; productivity, customer experience, and the cost of labor has shot up as a result. Employers have frantically tried a variety of strategies to solve the issue.
Lending as a Model
According to Robert Half, the use of signing and retention bonuses rose 454% last year, with over a third of Canadian companies offering them. This is a lending relationship in the way that they are structured: as a potential employee, accepting a signing bonus means you get money from your employer upfront – which is essentially an advance on performance not yet earned. Nearly every signing bonus has conditions built into the contract that state you must repay some, or a portion of the bonus, if you leave the organization before a defined period. This creates both challenges and opportunities for organizations on how they structure and manage these relationships, especially once an employee has left the organization.
There have long been industries that have offered these bonuses; legal, skilled white collar (such as advertising/marketing), and others. What’s interesting is that a cursory look at LinkedIn or Indeed suggest that many industries that have never offered signing bonuses are doing so now; medical, retail, hospitality, and others. A shift into a bear market is not solving the pain employers are feeling in industries with critical shortages; not even a prolonged recession would solve the nursing shortage, for example. Even industries with a long history of offering bonuses (such as legal) suffer in administering and managing these relationships.
What’s clear is that labor has shifted, and employment instability is here to stay for many industries. Benefi is one company working hard to bring labor stability back to companies that place a high value on keeping employees around for the long term.