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Return of the Perk When the job market tightens

March 2004 Job Perks

Return of the Perk When the job market tightens, will your employees remain loyal? Smart entrepreneurs are moving now to keep their best workers happy.

For similar reasons, Joe Gustafson, who runs a software services company called Brainshark in Burlington, Mass., upped his employees' salaries by 15% last year--reversing across-the-board pay cuts he had made in 1999--and added performance-based raises as well. Chuck Gabbert, owner of a DreamMaker remodeling franchise in Peoria, Ill., pays into his employees' retirement plans, provides them money toward a truck, takes them on staff outings to hockey games, and has begun a liberal leave policy--all perks instituted last year to keep his remodeling crew's eyes off the classifieds. "You get these guys, and you want to keep them happy," he says.

Cohen, Gustafson, and Gabbert might sound as if they're living in the past, but in fact they and other smart proprietors are looking to the future--and they see a job market likely to become more competitive quickly. The unemployment rate recently dropped to 5.7%, and payroll growth has increased for several months. While it's too early to call it a major tightening of the job market, many analysts say that's just what's coming. "There's so much pent-up energy from this last recession that there's going to be a significant amount of job turnover, even from people who are happy in their current jobs," warns Roger Herman, a management consultant who publishes the weekly Herman Trend Alert newsletter.

But even if the job market doesn't rebound for months, employers who take workers for granted may suffer what Herman calls "warm-chair attrition," a loss of productivity stemming from workers' spending time on the job seeking other employment. Herman estimates that as many as 40% of today's employees are at least passively looking for other jobs, and he expects that number to reach 60% by 2005.

While no one is heralding a return to the days of office hot tubs and hotter IPO shares, today's perks are still meaningful. For starters, there's money. According to the National Federation of Independent Business, more than 21% of small-business owners raised worker compensation during the fourth quarter of 2003, while only 6% reported higher average sales. And then there are health benefits, which are becoming so expensive that employers and workers are starting to view them as perks.

But don't think that stock options will be the recruiting tool they were in the past. After the dot-com crash saw many options packages become virtually worthless overnight, most small-firm stock has lost its allure. "Options have gotten a bad name in the past couple of years because of the abuses of options granting," says William Hummer, chief economist at Wayne Hummer Investments, who points out that unless a company is very large, options granting dilutes the value of the company over time. "Options should be treated like booze. Use only in moderation."

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Fortune Small Business
March 1, 2004 by Kemp Powers

Just what year does Randy Cohen think he's living in? Cohen, who owns Ticketcity.com, a ticket-sales company in Austin with $15 million in annual sales, has been treating his employees as if they were fending off job offers every other day. About eight months ago he began hosting workplace contests for prizes such as Super Bowl tickets. He also started giving employees tickets to events such as the Masters golf tournament, access to country clubs, and invitations to a management retreat in Sedona, Ariz. "Losing my top employees was a big concern," says Cohen. "I can't do this without them."
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