Today’s job market requires a competitive compensation strategy that is about more than salaries and insurance. Paid Time Off (PTO) policies and living wage standards are playing an increasingly critical role in attracting and retaining talent. If your organization has not evaluated these aspects of its compensation structure recently, now is the time—especially with upcoming changes under the Fair Labor Standards Act (FLSA) overtime standards on the horizon (January 2025).
PTO Policies: The Game-Changer for Recruitment and Retention
Recent surveys reveal that approximately 50% of companies now offer PTO instead of separating vacation and sick time. On average, small- to medium-sized companies provide their employees 10 to 14 days of annual PTO. Nonprofits tend to offer more PTO, averaging 14 to 1 7.5 days per year.
Why does this matter so much? Paid leave options are one of the top concerns for job seekers. PTO questions are among the first questions asked during interviews and the answers heavily influence whether a candidate chooses to pursue or accept a position. Recent data shows that 63% of employees won’t consider a job that offers fewer than 15 days of vacation time per year. To further support how much employees value paid leave today, paid leave (or lack thereof) has become one of the most common complaints on employee exit interviews.
In short, PTO isn’t just a perk anymore; it’s a critical part of the employee experience. Flexible leave options:
- improve employee satisfaction
- reduce burnout
- support work-life balance
And all of the above contribute to higher levels of engagement, retention, and productivity.
Why Living Wage Standards Matter More Than Ever
In addition to leave policies, living wage standards are gaining attention in discussions around compensation. Data indicates that as few as 36% of companies use living wage benchmarks in their compensation models (though this is up from 10% in 2019). A living wage goes beyond the minimum wage, aiming to ensure employees are paid enough to cover basic expenses like housing, food, and healthcare to support a decent standard of living.
While relatively few companies currently use living wage standards, the potential benefits are clear. Companies that incorporate living wages can build a strong employer brand. Offering a living wage boosts employee loyalty and strengthens your employer brand, which is critical for attracting top talent in today’s competitive landscape.
The FLSA Overtime Payment Changes: A Perfect Time for Evaluation
Changes are coming to the Fair Labor Standards Act (FLSA) in January 2025. The FLSA updates will expand the number of employees eligible for overtime pay. This will affect how organizations calculate labor costs and comply with federal, state, and local wage and hour regulations.
Why Compensation Strategies Should Be Reviewed Now
Given the intersection of PTO trends, living wage considerations, and the FLSA changes, it’s clear that now is the time to evaluate your compensation strategies. Here are some key questions to ask as you assess your policies:
- Are your leave policies competitive? PTO plans plan can attract and deter job applicants, and directing impact your attrition and retention rates.
- Does your pay structure reflect living wage standards? While only 36% of companies currently adopt these standards, integrating them into your compensation strategy can boost employee satisfaction and long-term loyalty. Living wage policies can also be instrumental in improving retention for high-turnover positions paid at or near living wage ranges.
- Are you prepared for the upcoming FLSA changes? Now is the time to ensure compliance with new FLSA regulations and avoid potential legal challenges. Be prepared for phase II changes of the FLSA update in January – assess your employee census for the new regulations before the last minute.
In conclusion, a well-rounded compensation strategy that includes competitive leave policies, fair wages, and FLSA compliance is more critical than ever. Your organization can improve employee satisfaction, attract high-quality talent, and be prepared for the future if you evaluate these considerations.
Need help evaluating your compensation practices? Contact us for more information.
References/Sources
WorldatWork. SHRM.U.S. Department of Labor. US Chamber of Commerce. TrueList. Zenefits. One Digital.