By Kristin Brennan, VP of Marketing at Legion Technologies, joint winners of the Best SaaS Product for HR category at the 2023 SaaS Awards, and a finalist in the Best Cloud HR/HRMS Solution category at The 2023/2024 Cloud Awards.

According to the U.S. Bureau of Labor Statistics, the unemployment rate in the United States remains at 3.6%, which is close to the 3.5% pre-pandemic unemployment rate seen at the end of 2019, the lowest rate since 1969. However, industries such as retail, food services, and hospitality – which have a large hourly workforce – continue to face a labor shortage.

A high attrition rate among hourly employees isn’t new, with many employers replacing their entire staff within a single year. Unfortunately, these types of jobs have become undesirable for millions of employees, putting businesses that have come to rely on a robust frontline workforce at risk. As a result, employers are turning to even younger workers to fill the gap. This, in turn, comes with its own unique challenges, including stringent labor laws for minors and a workforce with other priorities outside of work.

As a result of this ongoing labor shortage, the balance of power has permanently shifted to the hourly employee. But what makes hourly jobs so difficult for employees and their managers? And what can employers do to optimize labor efficiency and maximize employee engagement?

Legion Technologies commissioned a study with Propeller that surveyed hourly workers and managers in North America to answer these questions. Here’s what we learned: 

The labor shortage is here to stay for employers of hourly workers

This year, there could be a mass exodus of hourly employees, with more than 62% planning to leave their jobs within the next 12 months, up from 42% in 2022. More than 38% report they will likely look for a new job in the next 6 months.

But why are so many hourly employees leaving?

1. Employees Want Flexibility

When hourly employees were asked why they think businesses are having a hard time hiring hourly employees, the most common responses were lack of benefits, undesirable working conditions, and not enough flexibility. The desire for greater schedule flexibility was an ongoing theme throughout the survey results, with hourly employees explaining that they now have other options, such as gig work, which provides tremendous flexibility. Employers of hourly workers are increasingly competing with gig jobs versus their peers to attract and retain this valuable group of employees.

In addition to pay flexibility, employees continue to demand schedule flexibility, with most citing it as the number one item that would persuade them to quit their current job and take a new hourly job. Schedule flexibility and control can come in many different forms, from being able to choose the number of hours they want to work per week, to having more scheduling options, to being able to easily pick up extra shifts.

2. Employees Are Facing Economic Challenges

Consumers are cutting back on spending due to inflation, which is hitting industries with large frontline workforces – e.g., retail and hospitality – particularly hard. This, in turn, is impacting hourly employees, who have reported experiencing increased stress levels and a negative impact on their wages or benefits. This financial uncertainty has led many to have to work more than one job: according to the U.S. Labor Department, nearly 8.4 million people in the U.S. are working two or more jobs, which is the highest level since the pandemic’s start.

What hourly employees really want is greater financial stability. Only a third of surveyed employees were satisfied with getting paid every two weeks, which has long been the standard in the United States. Instead, they want to access their wages much faster. The demand for the ability to get paid early has grown 20x over the past three years. When asked what the top incentives are that would persuade an hourly employee to quit their current job for a new one, early access to pay grew from 2% in 2021 to 43% in 2023. Payment flexibility is quickly becoming a must-have benefit.

Employers are struggling to find talent

With so many hourly employees planning to leave their current jobs and industries, it’s no wonder that employers are struggling to recruit hourly talent. Schedule flexibility, recognition and rewards, and the ability to get paid early are becoming must-have benefits for those looking to recruit and retain hourly employees.

But what else can employers offer to their employees:

1. Managers Need Intelligent Automation

With a shift in the balance of power and the desire from employees for greater schedule flexibility and control, it’s no surprise that managers of an hourly workforce reported that the most challenging thing they have to do is to try to match business needs with employees’ schedule preferences – all while staying within the approved labor budget.

Manual processes are a critical issue for many managers, e.g., the use of basic spreadsheets to create schedules. These manual activities mean they have to spend time on tasks that could be intelligently automated, such as maintaining schedules and addressing call-outs, approving employee punches and time sheets, and approving shift swaps and time-off requests. Managing callouts continues to be a significant challenge for managers, with most spending a significant amount of time on phone calls and text messages to fill each open shift.

Employers should invest in technology that enables intelligent automation to reduce administrative burdens. Instead of spending too much time on administrative tasks such as manually creating schedules and managing callouts, AI-powered workforce management solutions deliver the intelligent automation of scheduling and administrative tasks, which enables managers to focus on what matters most. If employers could remove these administrative burdens, the vast majority of managers would put that time back into the business and focus on what matters most, like coaching and developing their teams and interacting with customers.

2. Managers Need Modern Workforce Management Solutions

Employees continue to desire improved communication tools and greater recognition and rewards. Employers should consider providing tools that make it easier for managers to communicate with their teams, such as an easy-to-use mobile app with features including built-in chat and a newsfeed that provides employees with direct updates from management. In addition, they should be able to automatically send messages and give rewards to recognize employees based on performance.

As Earned Wage Access (EWA) continues to gain in popularity, employers could also offer the ability to get paid early for employees and managers alike. This is particularly beneficial for hourly workers, as it gives them greater flexibility and control over their finances.