Memos from Madison

MEMOS FROM MADISON

If you haven’t stopped to think about employee retention and upped your game lately, now is the time.

PETE HANSON, CAE, CISR Executive Director, PIA of Wisconsin

DO YOU HAVE A PLAN TO KEEP YOUR EMPLOYEES IN 2022?

INTEREST RATES

While the insurance industry has been in an inflationary environment for over a year now, many other segments of the economy are now in “hard markets” too. Fuel, food and transportation prices are the most noticeable and are driving the Consumer Price Index (CPI) higher each month. Inflation in May, as measured by CPI, was 8.6 percent. That’s the highest inflation the U.S. has seen since I was wearing tube socks and riding a bike with a banana seat… in 1981. In particular, the inflation in labor costs is very high right now. The labor market is extremely tight and there are many opportunities out there for employees to leave your employ and make more money. I don’t just mean your strongest employees. I mean any person with a professional demeanor and a willingness to show up to work. If you haven’t stopped to think about employee retention and upped your game lately, now is the time. Here are key areas that you should address:

Employee Wellness and Work/Life

Balance: Following the pandemic, there is a strong focus on flexibility and work/life balance. Employees are expecting the ability to do some of their work remotely and some employees will change jobs for this reason alone. Consider allowing a hybrid option for employees to work some days from home. Update your PTO policies to be more competitive and perhaps even consider an “unlimited PTO” policy.

Employee Training and Growth:

Encouraging your employees to learn new skills and earn professional designations is good for both of you. It raises their knowledge and confidence and shows them you are willing to invest in them. Yes, you have to cover the cost and consider those days “work time,” but it will be worth the investment. Competitive Compensation: Reassess wages, commission and bonus structures, and benefit packages to remain competitive with others in the industry (both agencies and carriers). Show your key people that you value them, so they don’t feel the need to test the waters elsewhere. Empathetic Management: Do you and your managers lead their teams with transparency? Humility? Empathy? Do performance reviews ask employees to review their managers? How often do you check in with employees to determine their workload and whether they have the tools they need to do their jobs? If your staff knows you value them and care, they are less much less likely to look elsewhere.

With the Federal Reserve raising interest rates by leaps and bounds, the cost of borrowing money is rocketing higher. What’s more, that trend is likely to continue for a while. To wit, the mean 30-year-fixed mortgage rate has gone from 3 percent to 6 percent in just a few months. I bring this up because floating rate loans are not uncommon among small businesses. If you have a fixed rate on your business loan, congratulations. The money you borrowed some years ago is getting cheaper by the day in this environment. If you have a loan with a floating rate, however, the cost of that loan could start to impact your monthly cash flow pretty quickly. Floating interest rates are usually tied to the Prime Lending Rate, which the Fed intends to increase by as much as 2.5 percent in 2022. Interest payments on a $1 million loan would go up by $25,000 in that scenario. That would equal $2,000 per month in additional interest payments. Now would be a great time to talk with your banker about your loans and review the terms. If any have floating interest rates, see if you can refinance to a fixed rate and/or pay down the principal to put a lid on your financing costs.