Securing Talent Using Benefits
Paul Knopp, head of consulting giant KPMG, says the firm has had “to recognize that there is a red-hot labor market and there is attrition [and] it’s a different market than existed in the past.” Thus, KPMG is implementing several changes to benefits to help the company compete for workers. The firm has as many as 5,000 positions it is trying to fill. First, they are moving away from a pension (defined benefit) plan to a 401(k) plan, which Knopp describes as “more flexible and portable…giving employees more control over their future and money.” The 401(k) will be more generous than the typical plan, which might, for example, require an employee to contribute 6% of their pay before the employer contributes an additional 3%. In contrast, KPMG will require no employee contribution and KPMG will contribute 6-8% of employee pay, depending on employee tenure. Second, KPMG has added three weeks of paid leave to care for a family member (beyond the standard paid leave already received). Third, it is now giving new parents 12 weeks of paid leave (regardless of the primary caregiver), compared to the previous six weeks for the primary caregiver and two weeks for the other parent. Finally, KPMG is reducing the cost of employee health premiums by 10% without any change in health care benefits. As Daniel Zho, senior economist at Glassdoor puts it, “Employers [like KPMG] know they have to throw everything but the kitchen sink to get people to stay [and to join the company].”
Questions for Students
1. Why is KPMG focusing on increases in benefits instead of wages and bonuses? Explain why you do or do not expect this to help KPMG be more effective.
2. Will these benefits be attractive for all KPMG employees? Why or why not?
Note to Instructors
Bring to students’ attention the different tax treatment of wages and bonuses--wages and bonuses are taxed; benefits often are not. Thus, an added dollar in the form of benefits can carry more value if the benefit fits the needs of your particular workforce. Emphasize that reducing employee contributions to retirement and health care effectively increases employees’ take-home pay, even if wages are not increased. Demographics influence benefit attractiveness. For example, being at an age to have children likely makes expanding paid family leave attractive because a parent will not have to quit their job or have someone else care for their child.
Sources: Jennifer Alsever. Consulting Giant KPMG Ups 401(k) Plans and other Perks to Retain Workers. Fortune.com, October 25, 2021; Alessandra Malito. KPMG Employees Will Get Automatic Employer 401(K) Contributions — without a Match — And Many More Benefit Perks. Marketwatch.com, October 26, 2021.