The US economy passed a historic milestone Friday. With the unemployment rate holding steady at 3.7%, it marks five straight months of a jobless rate below 4%, a feat not seen since 1969.
For leaders, it’s a further confirmation of how radically different the jobs market is from a decade ago, when there were dozens of applicants for every open job. Now, with employees having more leverage, organizations are getting creative to incentivize candidates and retain existing employees.
Many firms are still unwilling to commit to large across-the-board raises. A new Korn Ferry study shows that while employers are expected to raise pay 3.1% in 2019, real wages—or what’s left over after accounting for inflation—will be just 0.6%. But while that average applies to a great swath of jobs, people at the ends of the job spectrum are doing better. Several large firms, for instance, have boosted their minimum wages to $15 per hour.
At the other end, organizations are paying up with salaries and long-term compensation plans to attract top experienced senior executives, says Doug Charles, Korn Ferry’s president. “The market is healthy and activity is high,” he says. “People are looking for highly adept, skilled, agile, motivational been-there-done-that leaders.”
For everyone else, there’s been a push to boost so-called secondary benefits, says Tom McMullen, a senior client partner and leader of the firm’s North American Total Rewards Expertise group. Parental leave has been a big mover this year, with 52% of all employers now offering some form of time off for parents (up from 47% last year). Corporate leaders are expanding college debt payment programs. Only 6% of firms nationwide have some form of debt payment plan, McMullen says, but it was only 4% a year ago. “A company offering that type of benefit can really differentiate themselves.”
If the jobs market continues to be strong, there could be another benefit that gets traction in 2019: unlimited time off. The perk is now offered in 20% of technology firms, where the culture is to work long hours and days until a project is complete, then have some down time. When the tech sector does something, leaders in other areas begin to take notice, McMullen says. Corporations may also be more interested in unlimited time-off plans because it would end the practice of paying departing employees for any unused vacation days.
While the secondary benefits are getting boosts, the big compensation drivers—healthcare and retirement options—are not. In healthcare’s case, the costs are going up already, and adding increasing retirement contributions is a significant, and fixed, financial commitment. “Employers want to put more emphasis on variable pay rather than fixed costs,” McMullen says.