Manufacturing During a Labor Shortage: How Manufacturers Have Been Innovating on Ways to Attract New Employees

For the past several months, the media have been reporting on the general labor shortage in the United States. Most manufacturers have been understaffed in their factories for even longer than this news cycle, but current events have transformed what before 2020 was merely a typical challenge for manufacturers seeking to hire enough people, into a dilemma that for many is mission critical. Even if understaffed manufacturers have been able to hit most or all customer deadlines this year, continuing to operate with staffing shortages for too long can cause short- and long-term damage to workforces and therefore businesses. Requiring employees to work excessive overtime hours not only leads to employee burn out, but it also increases unplanned absences, work injuries, overuse of leave under the Family and Medical Leave Act (FMLA), additional compensation for overtime premiums, disengagement (with resulting lost productivity), and attrition. Unusually heavy workloads for an understaffed factory workforce can also attract union organizers.

Benchmarking Survey Results

In an effort to understand workforce challenges manufacturers face and how they are coping Ogletree Deakins’ Manufacturing Industry Group recently administered a benchmarking survey to which 40 manufacturers responded.

Here is a summary of the highlights, along with some key takeaways for manufacturers:

Increasing the Candidate Pool

In order to hire more people, manufacturers can consider more eligible candidates. The math is undeniable. In so-called “normal” times this means finding more eligible candidates. With today’s labor shortage, however, it may also require manufacturers to lower their job requirements in order to make more of the candidates eligible. In other words, manufacturers may consider knocking down some hiring barriers that they chose to erect, and thereby turn away fewer candidates and let more potential new hires in the door.

1. Reducing or Eliminating Hiring Requirements

Our survey results show that manufacturers are doing just that—reducing or even eliminating several of their previous hiring requirements, such as:

• 37 percent of manufacturers ceased to screen for marijuana in pre-employment drug tests;
• 27 percent of manufacturers ended marijuana screenings for non-safety sensitive jobs only;
• 12 percent eliminated all pre-employment drug testing;
• 32 percent narrowed the scope of disqualifying convictions;
• 27 percent relaxed the requirement to have a high school diploma or general education development (GED) diploma;
• 20 percent loosened aptitude testing requirements;
• 20 percent eased required prior experience standards;
• 5 percent eliminated an English comprehension requirement.

2. Targeting Specific Populations

Manufacturers also expanded the pipeline of candidates by implementing strategies that targeted specific populations with a more tailored recruiting approach. Respondents reported ramping up intentional efforts to target the following particular groups for potential hires:

• Approximately 60 percent targeted students at nearby trade schools and community colleges;
• More than half focused hiring efforts on employees of nearby employers;
• Nearly 40 percent sought military veterans; and
• 17 percent pursued former prisoners.

Perhaps most interesting in this category is the notion that employers may be less willing to “play nice” with other employers in town and refrain from attempting to hire others’ employees. But desperate times call for desperate measures, and more employers seem to be focusing recruiting efforts on individuals who are already comfortable working in a factory job.

Show Them the Money

Many employers are offering more money to attract more candidates and close the hiring deal. Nearly 50 percent reported initiating a sign-on bonus, with 67 percent of respondents paying the bonus upon the new hire’s successful completion of a probationary period (of 60 or 90 days), whereas a minority paid out the signing bonus as early as the new hire’s first paycheck.

Manufacturers also increased base pay. In response to the current hiring needs, 56 percent of manufacturers reported increasing base wages by 1- 5 percent, and 22 percent of respondents increased their base pay rates by 6-10 percent. A more nuanced approach is to increase the shift differential paid for work on the second and third shifts—the jobs to which manufacturers often assign the new hires out of respect for the tenure of the current employees who choose first-shift work. Those higher second and third shift pay rates can aid recruitment, without increasing labor costs on the traditionally coveted first shift. Respondents mentioned other alternatives to increasing pay, including ramping up starting pay progressions to full rate more quickly than before and combining some job classifications so that the lower paid classification is combined with and assumes the higher base wage rate of the other.

Also many respondents mentioned adding or increasing referral bonuses paid to current employees for the referral of a candidate who accepts a job offer (and completes the probationary period). Incentivizing employees to help solve the shortage can be a “win- win” for all parties.

Employers seemed to conclude that these signing bonuses and wage increases gave the biggest bang for the buck, preferring them over spending on enhanced fringe benefits. Only 12 percent added a parental leave benefit and only 10 percent reduced employee costs for medical benefits.

Time Is Money

Some employers are attracting candidates by improving time-off benefits or scheduling flexibilities. In fact, most have added paid time off with 61 percent adding up to 2 days per year (perhaps offering paid time off on an employee’s birthday, or new paid company holiday such as Juneteenth); 7 percent adding 3-4 paid days off per year; and another 7 percent have added 5 or more paid days off per year.

Some employers are offering scheduling flexibility: 17 percent of responding employers are not requiring new hires to work a full-time schedule and 22 percent are offering leeway with the exact start and end times for a workday.

Managing the COVID-19 Pandemic

At the time we conducted the survey, most manufacturers had eliminated masking requirements—51 percent eliminated the requirement for vaccinated employees, whereas another 37 percent eliminated masking for all employees regardless of vaccination status. Employers are also reducing screening requirements. But we cannot make much of these findings in the context of this survey because these changes to COVID-19 protocols are location- and workforce-specific, and the target keeps moving. The big takeaway is that employers seem to be seeking to reduce employee burden in relation to COVID-19 protocols, where appropriate.

Other Ideas

Sometimes some “gold” is found in the comments section of surveys. Responding manufacturers noted the following extra efforts they had made to recruit and hire individuals in the current environment:

• conducting in-person job fairs with free food and beverages;
• identifying new avenues to advertise locally for workers; and
• providing extra transportation-related benefits, presumably to overcome any potential impediments employees may have commuting to and from the factory.

Key Takeaways

Per usual, manufacturers are reacting to this business challenge with alacrity and creativity. Hiring workers during a labor shortage requires an intentional process and flexibility. Here are some key action items manufacturers may want to consider as they work through the labor shortage:

1. Engage in a thorough and honest self-examination of the obstacles the factory faces in attracting and hiring enough workers.
   1. For those obstacles created or controlled by the company, manufacturers might consider the costs and benefits of eliminating or reducing that obstacle.
   2. For those obstacles imposed on the company by external factors, the manufacturer should think creatively about ideas for navigating them.
2. Decide which changes to make, get buy-in from key stakeholders, and implement.
3. Pay attention to the current workforce’s overall morale. As employers focus attentions and provide benefits to new hires, they may see an increase in resentment or ill will from current employees who may feel forgotten or cast aside.
4. Don’t forget to consider ways to strategically trumpet these changes in the marketplace.