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A New Way To Offer Part-Time Employees Benefits for Higher Retention

A New Way To Offer Part-Time Employees Benefits for Higher Retention
Posted on Wednesday, September 18, 2019 by Monica Hinchey
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Turnover is an issue that impacts all employers, but some industries have historically dealt with more churn than others.

ICHRA-part-time-benefits

This includes retail and hospitality, where jobs may be part-time, lower-paid and considered as a stepping stone to other employment elsewhere. Lower workforce participation by young people, who are opting for post-secondary education instead of entering the workforce right out of high school, is also an issue.

Retention rates are always top of mind. 

HR pros working in the retail and hospitality space are even more focused on recruitment and retention than colleagues in other industries. According to a study by Ceridian, three-quarters of HR pros working in retail and hospitality cited retention as a top-three challenge, with another 50% citing recruiting.

Considering the tight labor market, workforce pressures on retail and hospitality employers—which has always been keen—may continue to increase as would-be employees have other options than previously.

By the numbers, restaurant workers are the most likely to leave (17.2%) followed by those in retail (16.2%), with supermarket workers trailing slightly (15.4%). Certain positions have the highest turnover: retail salesperson (19.2%), food service professional (17.6%) and hospitality professional (17%).

Hourly or contract jobs bring unique difficulties. 

The majority of employees in retail and hospitality are hourly, and that brings specific challenges in terms of retention. A top reason for attrition among all employees is the opportunity for advancement, and people will leave if they feel they can’t attain at their current employer. This applies to hourly employees who seek not only advancement but also more money.

Within the retail sector specifically, salespeople are the most common type of employee, followed by cashiers and stock clerks/order fillers. These employees typically earn less than $30,000 annually, which likely fuels the search for more lucrative employment.  

No benefits, big problem. 

In addition to earning significantly less than the national average of $47,000, these employees may also not be benefits-eligible. According to Guardian, 20% of retail employees and 36% of hospitality workers are scheduled for less than 35 hours a week, which often shuts precludes from an employer’s benefits program. In the same study, Guardian found that 87% of part-timers have healthcare coverage, but half of them aren’t getting it from their employer. Instead, they’re buying it through a public exchange or some type of association.

Benefits increase retention and loyalty among all employees, and this includes part-timers. Part-timers with benefits were more likely to want to stay with their current employer for three or more years, and they also report a higher level of job satisfaction and financial well-being, both of which contribute to job productivity.

When there’s more at stake than simply a paycheck—and a low one at that—retention improves. Benefits make an employer more “sticky” and they also contribute to brand equity, an intangible that is highly valuable to both retail and hospitality companies.

While some well-known retailers extend coverage to part-time employees, they are the exception. Offering medical coverage is expensive, and not every employer can bear the cost of ever-escalating premiums.

A new option is on the table for those that can’t afford to offer benefits. 

Which brings us right back to the age-old issue of high turnover among retail and hospitality employers. How can you compete with an employer just down the road that offers both a paycheck and benefits? Benefits are a powerful retention and recruitment tool, but not if you can’t afford to deploy them.

For employers that rely on part-time talent, Individual Coverage Health Reimbursement Arrangements (ICHRAs) are a new option that can enable you to extend coverage to non-benefits-eligible employees.

Effective January 1, 2020, employers can establish these new types of HRAs for certain classes of employees (think part-timers) and fund notional accounts used to buy individual coverage. There are no requirements in terms of the amount the employer contributes, which limits both cost and exposure.  

For retail and hospitality employers who have traditionally faced strong head winds around recruitment and retention, ICHRAs might be the next great benefits breakthrough. They offer the opportunity to provide medical coverage to part-time employees cost-effectively with limited risk. And, that should help with the fierce competition for great talent.

Read more about ICHRAs and how employers can leverage these accounts to extend benefits to part-time employees.

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