When—and How—to Negotiate Benefits with Workers and Job Seekers

Be prepared when employees and job candidates request extra benefits

By Joanne Sammer September 4, 2020
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man and woman in office two people negotiating

An employer's willingness to negotiate benefits packages with current and prospective employees can make all the difference when it comes to retaining and hiring talent.

An October 2019 survey of more than 1,000 employees found that almost 60 percent said it was either extremely or very important for an employer to be open to benefits negotiations.

Employees are proactive when it comes to these negotiations. Of the 64 percent who attempted to negotiate benefits with at least one employer, 87 percent did so during the hiring process and 60 percent after being hired. Roughly 80 percent of those who sought to negotiate benefits said they were successful, according to the survey by Paychex, a payroll and benefits services firm.

Paychex also polled nearly 300 hiring managers about the benefits requests they were most likely to grant.

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Tread Carefully

Employee benefits negotiations can be difficult, however, with a range of legal, tax and regulatory issues involved. Although the Paychex survey found that 401(k) matching or discretionary contributions are the most desired benefit (cited by 75 percent of respondents), employers must tread carefully when considering these requests so that they do not run afoul of IRS nondiscrimination requirements.

Similarly, the 47 percent of surveyed workers who requested subsidized insurance premiums may not realize that employers face a thicket of tax, legal and regulatory issues if they give some employees, and not others, certain health benefits.

Employee benefits and the laws and regulations governing their use are complex, with significant costs associated with getting things wrong.

"There may be exceptions at the executive level, but, by and large, benefits are governed by the Employee Retirement Income Security Act and disparity can lead to discrimination claims or even having specific offerings invalidated for the whole group," said Debora Roland, vice president of human resources at CareerArc, a job-recruitment software firm with offices near Los Angeles and Boston. "Companies need to make sure they are in compliance and not inadvertently setting themselves up for problems."

Employers should also consider what impact providing new or different benefits to one or just few employees might have on the organization and its other workers, who may feel "cheated" if they find out.

A Range of Requests

"Men reported requesting stock options almost three times more than women, and people ages 50 and older were more likely to request stock options than those in their 20s," the Paychex survey found. Among other demographic differences:

  • Women were more likely than men to request flexible work hours and parental leave.
  • Employees in their 20s were more likely to request tuition or student loan reimbursement from their employers.
  • Older employees were the most likely to request disability insurance.

If an employer decides to negotiate benefits, the first step is choosing which benefits programs can be included in the negotiations. Employers must "be clear about what benefits they are legally able to negotiate," said Kristen Fowler, practice lead with Clarke Caniff Strategy Search in Troy, Mich. "Be upfront with employees and job candidates on what benefits the organization offers and if they can be changed," she said.

It is important to consider the value an employee or job candidate brings to the organization compared to the risks, costs and potential complexity of offering something different. "Normally, we will not consider changing our standard offerings unless it is a particular higher-level management position or perhaps an ideal candidate for a role we have been unable to fill," said Jilian Dimitt, SHRM-SCP, human resources director for Optima Office in San Diego.

[SHRM members-only toolkit: Interviewing Candidates for Employment]

Remote Work and Flex Hours

There are some areas where what employers can offer and what employees want overlap. For example, the Paychex survey found that:

  • 73 percent of employees tried to negotiate flexible hours, and 31 percent of employers granted them.
  • 66 percent of employees tried to negotiate flexible time off, and 25 percent of employers offered it.
  • 30 percent of employees tried to negotiate telecommuting, and 5.4 percent of employers allowed it—figures that have likely surged since COVID-19 struck the U.S. in March.

"If the ability to telework isn't included in a job announcement, [employers can] expect to be asked about it," said Adam R. Calli, SHRM-SCP, a principal with Arc Human Capital in Woodbridge, Va., and a SHRM certification instructor at George Mason University. "So many jobs are being performed remotely that the new question is, 'Will I be able to continue to telework?' "

The new question is, "Will I be able to continue to telework?" 

As these requests and questions become a fixed part of recruiting processes and employee retention strategies, employers will need consistent policies governing telecommuting.

"Smart firms will consider which positions are eligible for telework and to what extent—one day a week? Two days? More?" Calli said. Inconsistent policies "could lead to a patchwork of telework decisions and lead to potential accusations of favoritism or discrimination."

The PTO Question

Paid time off (PTO) is a perennial focus of employees and job candidates, many of whom are looking to maximize flexibility in their working arrangements. In some cases, employers must consider job candidates' situation with their current employer when negotiating PTO benefits.

Given that long-tenured workers can accumulate a significant amount of unused PTO, other employers trying to hire talent in this situation have to take that into consideration. Unused leave "can act as golden handcuffs, making it difficult for a person to give it up," Calli said. "If an organization is trying to hire away a higher-ranking employee or one who has been with an organization for a long time, it should look for creative approaches to win them over before arranging the first phone screen."

Options include early Friday closings or a weeklong closing during either the end-of-year holidays or scheduled plant or facilities maintenance.

The popularity of both PTO and work flexibility is not lost on employers, and they have begun to modify PTO programs significantly. Some employers now allow employees to take cash in lieu of at least some of their allotted PTO. A growing number of employers are adopting unlimited PTO policies to fully leverage the power of PTO as a recruiting and retention tool. 

Of course, unlimited PTO programs have their own pros and cons that employers should monitor and consider when administering these programs.

Focus on the Big Picture

Above all, employers should pay close attention to what employees and job candidates are asking for, and how that differs from what the employer currently offers. If there are multiple requests for certain new programs or changes, that can indicate that benefits programs are not keeping up with workforce needs and labor market demands.

"If employers are also finding it difficult to hire key talent, that could indicate a need to revisit benefits and, indeed, the entire employee value proposition to determine if they need to expand their program to meet the needs of prospective and current employees," said Barbara Steele, performance practice lead with the NeuroLeadership Institute, a consulting firm based in New York City.

Joanne Sammer is a New Jersey-based business and financial writer.

Related SHRM Articles:

Provide Security with Personalized Employee Benefits, HR Magazine, August 2020

Spotlight Value of Benefits Package During Open Enrollment, SHRM Online, August 2020

Planning 2021 Benefits Changes for the COVID-19 EraSHRM Online, July 2020

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