Small Businesses Loosen Up Corporate Structure to Boost Bottom Line


How would you like to bring your dog to work, create your own hours, and enjoy free lunch five days a week? Although this may sound more like dorm life than corporate life, a growing number of small businesses across America are offering such "work perks" to employees in order to retain top talent and keep costs low.

"Having a job is not just about the money. You spend more hours a day with the people you work with than the people you marry, so if you're not happy in your job, no matter the amount you're taking home, it's just not worth it," says Candace Whitaker, senior vice president of human resources for Signature Consultants, an IT consultancy.

Signature Consultants began offering free breakfast and lunch three days a week at its 60-person Fort Lauderdale, Fla., headquarters five years ago when it became clear that  some employees simply did not have time to venture outside the office for lunch during busier times. The company also offers monthly team outings such as bowling, scavenger hunts and dinners out, and employees are encouraged to bring their children to work on school holidays.

"Small companies are trying to differentiate themselves, and offering small perks like lunch or flexible hours can be a great way to help them compete with big companies that may be in a position to offer higher salaries or pensions," says Christina Callahan, a manager at global career management firm IMPACT Group. "Offering work life benefits like this makes them seem flexible and fun, and overall it can help make their employees happier."

The recession also pushed many small businesses to start offering perks when they couldn’t afford pay increases, according to Paul Lopez, head of employment law litigation at Florida-based law firm Tripp Scott.

"We've come through some tough economic times, and companies were struggling to survive and figure out how to retain employees," says Lopez. "Basically, they figured out how to compensate employees in a way that doesn’t impact the bottom line but still creates a more positive morale in the work place."

Whether employees are allowed to bring their pets to work, wear jeans  or work flexible hours, these perks are virtually cost free, and can be smart for small businesses to offer in lieu of providing employees with a monetary raise.

"It's not going to cost the company more, but it will provide a much-needed morale boost even if salaries are staying a little lower than people like," says Lopez. "Dollars are important, but people are looking at workplace environment more and more."

Although there will certainly be a cost associated with providing meals to employees, food is not deemed income-based compensation and cannot be taxed, says Lopez. Small businesses can be more flexible with offering these workplace extras because they are more nimble than large companies and are in a better position to offer food for a smaller number of employees.

Retention is incredibly important at small businesses, says Cathleen Faerber, managing director of The Wellesley Group, an executive search firm in Chicago. Faerber says she’s seen firsthand that offering work perks can help companies retain an additional 3% to 5% of their staff annually, and for most recruiting firms, the fee for finding a new employee totals 30% of the person's annual salary. For an employee making $80,000 annually, the recruiting fee would total $24,000. If that same company spent $5 per day on lunch for 100 employees, the cost would total $26,000 per year.

"You see pretty quickly that even if offering lunch helps you to retain even an additional 1% of your employees annually, it's well worth it," says Faerber. "Let's say you retained an additional three people and even gained a few referrals because of your positive company culture, you've saved $100,000 a year. Not only that, if your employees are healthier and happier, they're going to take less time off. Overall, it's investment spending."

Employees today are much more sophisticated than ever before, Faerber says. Workers’ mindsets have changed because they have seen enough layoffs and scandals recently and think, "Corporations are not going to be loyal to me, so I have to take what I am going to get." Smart small businesses know that offering employees a free gym membership or food makes them feel like the company respects them and values them.

Although perks became more commonplace following the recession, they're also likely to come in handy in the event of another economic crisis, says Shawn O’Connor, founder and CEO of Stratus Careers, a small business career consulting firm based in New York.

"It's very difficult to lower a person’s salary, but if you have to pull back a perk, people don’t feel like it's coming out of their pocket. They'll feel more like, 'Oh, now they can only pay 50% of my gym membership. Well, it was nice while it lasted,'" says O'Connor.

And don’t expect these workplace perks to fade when the economy improves, O’Connor adds. In fact, as the as market for work increases, more businesses-- even large ones-- may begin offering incentives as a way to differentiate themselves from other companies.

"Companies are going to want to make their $50,000 salary more attractive than anyone else's," O'Connor says. "Things like allowing people to keep their own schedules or have their dog at the office are no cost at all to an employer, but you get that great cultural benefit." 

But small companies shouldn’t rely too heavily on the power of perks, even if they see they’re gaining more interest in their company, says Callahan.

"There is absolutely nothing wrong with having perks. They are on the 'nice to have' side of things. Initially, they will attract people, but they are not long-term career drivers and people know that," Callahan says. "Small businesses should be highlighting the real reasons why it's great to work there, like the fact that an employee can take on many more responsibilities there and often times work hand-in-hand with the CEO. The main reason to work at a small business is to increase your skill set and move up the corporate ladder much faster, not bring your dog to work."