CFOs Plump Salaries, Perks to Land Elusive New Employees

The “Great Resignation” is exacerbating skills shortages across industries and forcing companies to pay more, driving up costs at a time of already high inflation. In a survey released last week, chief financial officers at U.S. businesses said quality and availability of labor was their No. 1 concern, with three-quarters of them stating they have difficulty hiring, according to Duke University’s Fuqua School of Business, which conducted the poll with the Federal Reserve Banks of Atlanta and Richmond.

Companies plan to keep hiring new workers and increasing non-wage compensation—for example, for healthcare and other benefits, the survey of 301 CFOs found. Wage bills are forecast to rise by 6.9% this year and next, while wages for new hires are set to rise by about 10%, according to the survey.

Companies across the country—discount retailer Big Lots Inc., furniture retailer MillerKnoll Inc., food distributor Sysco Corp. and software firm Autodesk Inc., among others—are wrestling with the situation.

Columbus, Ohio-based Big Lots has increased wages in certain locations, offered heftier employee discounts and doubled its referral bonuses to $500. In September, the company upped its hourly rate for workers by $3 to $18.50 at its Tremont, Pa., distribution center, in part due to intense competition for warehousing staff in the area, CFO Jonathan Ramsden said. He is also evaluating wages in other locations.

“We need to be tracking the number of stores that are understaffed,” he said, adding that this is a “week-by-week, almost day-by-day exercise.” Big Lots declined to state how much it spends on retention and recruitment.

The company’s average rate for hourly workers is about $14, a “low-to-mid” single-digit percentage increase from a year ago, Mr. Ramsden said. Big Lots has about 35,000 employees and plans to increase its head count by 3% to 4% next year as it opens new stores, he said.

MillerKnoll, the Zeeland, Mich.-based manufacturer of office chairs and other furnishings, has increased wages for most of its factory workers in North America over the past few months, CFO Jeffrey Stutz said. The company, formed this year when Herman Miller Inc. bought design firm Knoll Inc. for $1.8 billion, also raised salaries for employees in non-production roles.

Labor costs during the quarter ended Aug. 28 went up by $5 million compared with the prior-year period due to higher wages and overtime pay, Mr. Stutz said, adding that the company expects to spend less on overtime once current conditions ease.

Recent salary increases, however, will likely remain in place, according to John Graham, founder of the CFO survey and a professor of finance at the Fuqua School of Business.

“We expect these salary increases to be permanent,” Mr. Graham said. “And they absolutely increase costs for the firms, putting pressure on the firm to increase prices of their own products and thus increasing inflation.” In recent months, MillerKnoll has raised prices to offset higher costs, including for labor.

Salary growth at companies in the S&P 500 has been flat in recent years, with median compensation per employee totaling $70,496 in 2020, up from $68,410 in 2017, according to MyLogIQ, a data provider.

Houston-based Sysco, which serves businesses including restaurants, hotels and hospitals, spent $36 million on recruiting, training and retention during the quarter ended July 3. It expects those costs will remain elevated through at least the end of 2021, CFO Aaron Alt said. The company declined to comment on its past spending on those efforts.

In addition to bonuses, Sysco plans to launch a driver-training program to help new hires and other employees get a commercial driver’s license.

“We’re taking active steps…so that what should be transitory does not become permanent,” Mr. Alt said. Sysco had about 58,000 employees as of July 3, up 1.8% from a year earlier, according to a filing.

The worker shortage also complicates matters for CFOs looking to fill positions in their finance departments. Autodesk, the San Rafael, Calif.-based provider of software applications, has over 1,000 open positions, including two roles for vice president of finance.

“It feels like the balance of power has changed from the recruiter to the recruit,” CFO Debbie Clifford said. “I have never seen a market like this in my career.”

Ms. Clifford herself in March left her previous CFO job at the parent company of SurveyMonkey, SVMKInc.—which recently changed its name to Momentive Global Inc.—to take on her current role. In the past 90 days, she released additional funds for recruiting and is reviewing compensation for finance workers to ensure it is competitive. She said she also spends more time talking with prospective candidates.

Lithia Motors Inc., a Medford, Ore.-based chain of car dealerships, recently launched a rotation program for graduates in its finance department, CFO Tina Miller said. The company, which employs about 900 people in finance, also has a similar program for data analysts.

“It’s definitely competitive out there,” Ms. Miller said.

Apart from higher salaries, training and perks, companies are building out their equity packages to attract and retain talent. Todos Medical Ltd. , a biotech firm based in Israel, recently gained shareholder approval to create an employee options plan, CFO Daniel Hirsch said. The company plans for its options to vest after four years.

“That’s the kicker to make people stay,” Mr. Hirsch said.

In October of last year, Autodesk went in the other direction, overhauling its equity awards and expanding them to all employees. A third of shares now vest after one year of employment, and the rest on a quarterly schedule after that, “enabling employees to realize the benefit of their equity sooner and more often,” a spokeswoman said.

The three-year vesting schedule “is a differentiator versus other tech companies” that vest on a four-year schedule, she added.

Write to Nina Trentmann at [email protected] and Mark Maurer at [email protected]