One of the most common issues public sector organizations face is attracting and retaining talent—often due to a competitive job market and budgetary constraints. According to the Bureau of Labor Statistics, quitting rates have been on the rise over the last 10 years, reporting that annual total quits rose from 1,222,000 in 2010 to 1,435,000 in 2013 to 1,869,000 in 2016 to 2,060,000 in 2019.[1] Even before the pandemic, school districts were seeing teacher absence rates rising, according to a report[2] from the EdWeek Research Center, commissioned by Kelly Education, the school staffing division of Kelly Services. Fifty-six percent of those surveyed said teacher absence rates are higher now than five years ago, and 71% of school administrators and board members see the demand for substitute teachers increasing in the next five years.

As 2020 comes to a close, public sector employers may be reconsidering their talent acquisition and retention strategies. Part of forming a winning strategy involves understanding the common causes of attrition and different ways they can be addressed.

Common Reasons for Attrition

Attrition can occur for several reasons, but competitive compensation and retirement benefits, health care costs, and advancement with other employers tend to be the most prevailing factors that prompt workers to seek employment elsewhere.

With health care costs on the rise, it’s no doubt that both employees and employers are keeping a close eye on how the increase impacts both organizational and personal budgets. In fact, 95% of employers say reducing health care costs is an important workforce issue looking forward[3], which creates a unique challenge for the employer: reducing organizational costs of health care while at the same time reducing health care costs for their employees.

So how can employers bulk up their benefit package and create a competitive talent retention and acquisition strategy—without a blow to their budget?

Cost-Effective Options to Bulk Up your Benefit Package

Attractive benefit packages can increase the chances of employees staying during tough times or help persuade a candidate to choose your organization. Below are just a few ways to directly address some of the more common reasons for attrition and make your benefit package more attractive to talent prospects.

Offer Employees a Tax-Free Way to Pay for Health Care

If your organization has noticed that high health care costs have caused employees to leave, a Health Reimbursement Arrangement (HRA) may be the solution to your issue. An HRA is a triple tax-free benefit vehicle that helps participants pay for eligible medical expenses during active employment or retirement, which means the plan can be designed to either offset a high deductible health plan (HDHP) or bridge the gap between retirement and Medicare eligibility.

HRAs are funded completely by employers for potential tax-free growth over time and can either be funded while the employee is actively working (for use during or after employment) or upon retirement. Unique forms of compensation like unused accumulated leave can be used to fund the HRA, maximizing the use of already earmarked funds. What’s more, the employer can apply unique vesting schedules to the HRA that provide an incentive for employees to stay. Not only will employees see potential tax-free growth accumulating while they work, but no action is needed from them to enroll or contribute—creating a stress-free, generous benefit. Additionally, both the employer and the employee permanently save 7.65% on FICA taxes.

Depending on the plan design, HRAs can help offset costs like prescriptions, eyeglasses, doctor visits and premiums—completely tax-free—and can be used by the participant, their spouse and any eligible dependent.

Maximize Accumulated Leave and Offer a Tax-Advantaged Retirement Plan

Similar to the HRA, the Employer Sponsored Plan can be funded using unique forms of compensation, such as unused sick leave and unused vacation pay; however, with this retirement plan, the benefit can be used—tax-deferred—for whatever purpose a participant chooses once they retire or separate from service.

Funds are deposited by the employer into a 403(b) or 401(a) during active employment for use at retirement, which allows participants to monitor their retirement growth, helping them connect to the benefit they are receiving. Instead of a promise of something at retirement, they can see their retirement funds increasing in value while they work. Additionally, the employer can choose to apply a vesting schedule, which incentivizes employees to stay with the organization until they are fully vested in their benefit.

Employers and employees permanently save 7.65% on FICA taxes while also deferring income tax for the employee until a withdrawal is made. Funds are also invested with the potential to grow tax-free, which means increased value due to earnings over time, further maximizing the benefit.

Provide Part-Time, Seasonal and Temporary Employees with a Powerful Retirement Benefit

Many employers have difficulty providing part-time, seasonal, and temporary employees, such as substitute teachers, with meaningful benefits. The 3121 FICA Alternative Plan was specifically designed for this population of the workforce and allows employers to replace Social Security with a retirement plan that’s invested for potential growth. Instead of the 6.2% contribution into Social Security, employees contribute 7.5% of their wages into an interest-bearing account, on a tax-deferred basis, giving their money the potential to grow over time. Despite what seems like an increase in employee contributions, the employee is left with close to the same take-home pay.

The employer completely avoids the matching 6.2% Social Security contribution, which reduces the stress on their budget without sacrificing the value of the employees’ benefit.

Bulking up your organization’s offerings to employees is a great way to battle unwanted attrition and attract new talent. If you would like to learn more about these solutions, click here.

 

[1] Bureau of Labor Statistics https://www.bls.gov/bls/news-release/jolts.htm#2019

[2] https://fs24.formsite.com/edweek/images/WP-KellyServices-TheSubstituteTeacherGap.pdf

[3]   https://www.slge.org/assets/uploads/2020/04/workforcesurvey2020.pdf

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