Where Green Means Green: The Cost of Inexperienced Employees in Retail
Feb 26, 2020

With unemployment at 3.9% and retail turnover at 60% (15 percent overall) retailers have limited options when making a hire, resorting to taking on unskilled and perhaps less desirable employees.    

 

Attracting qualified retail workers is a known challenge.  As stores are closing, prospective candidates wonder if they want to work in a brick and mortar store, in fear they will be out of a job before too long. Kohl’s announced this month they are cutting 250 corporate positions as they begin a restructuring process and last month Macy’s announced closing 125 stores and laying off about 2000 workers.    Widespread technology use in retail has further cemented this mindset with positions in retail being eliminated by moving to a cashier fee store model. 

 

Competition from a more flexible gig economy also makes it more difficult to staff both physical stores and distributions centers.   The result is the replacement of skilled workers with those less skilled or “app” workers, leading to less steady reliable work for traditional workers. To combat these changes, retailers have been compelled to increase wages to gain hiring ground over other retailers, offering hourly wages as high as $13.

 

Identify the Who

Our 2019 study indicated that Gallagher Bassett is helping our clients control the cost of indemnity claims despite the rise in retail wages. In this edition, we’ve taken it a step further, identifying the impact of retail employee turnover is having on the claim costs for our industry book by looking closely at tenure.  It is common knowledge in construction and manufacturing jobs that inexperience is linked to claim cost.  Can we make the same assumptions in the retail space?

 

The study shows that those with fewer than 6 month tenure in the retail workplace will cost as much as 40% more in average paid per claim, experience 10% higher average lost work days, and 3% of their claims are more likely to end in litigation.

 

 

Focus on the Why

As market forces compel retailers to hire less practiced workers, they need to control claim costs, especially for the claims with recently-hired employees.  Perhaps the first place to start is considering why new hires tend to cost you more money.  Often this is due to inadequate training or turnover, but inexperience may indicate younger workers..  OSHA indicates younger workers are at risk of injury because of their inexperience at work and their physical, cognitive and emotional development characteristics as they are more apt to take risks.

 

There are possible psychological reasons for why claims made by less tenured employees cost more: fear of losing job to store closure or workplace automation, pressure to work faster or stressful conditions commonly related to seasonal assignments.  Lack of feeling workplace loyalty could affect return to work motivation, or result in the injured worker retaining counsel.  Millennials, driven by a sense of shared purpose, find this difficult to obtain with a short tenure in retail.  Return to work options may be limited due to store closures or other business pressures.

 

Address the How

The data indicates these claims will cost you more money so consider strategies to help mitigate these losses with the following strategies:

  • Work to develop streamline the hiring process using automation as suggested in this McKinsey study
  • Develop best practices for hiring seasonal workers including job descriptions and background checks
  • Create a new hire packet with training and company messaging so worker feels connected to the organization
  • Conduct safety training and/or utilize visual signage in back rooms for safety reminders
  • Consider whether language a barrier to communications in your claims handling or store training

 

Understanding that newly hired employees WC claims are going to cost you up to 40% more on average, it’s important to focus in on newly hired workers in claim reviews and settlement projects.  Utilize return to work coordinators to get the injured worker back to work or in an alternative work option as soon as possible. Be creative with return to work options including store employees to distribution or customer service work.  Lastly, remember the psychological aspect to these claims and work to make the injured workers feel a part of the company by sharing company newsletters or other updates when they are off work. 

 

 

Remember more tenure likely means better trained, more loyal employees, resulting in more favorable claim outcomes. Employ some strategies of your own to limit the cost of claims made by less seasoned employees.

 

 

Mary McGurn has 30 years of industry experience and leads the Retail Practice at GB. You can find her on LinkedIn

Ryan Perryman, GB Data Analyst is contributor to this piece.  You can find him on LinkedIn

 

References/Resources:

https://techcrunch.com/2018/11/05/7-eleven-is-bringing-cashier-less-payments-to-its-stores/

https://business.dailypay.com/blog/employee-turnover-rates-in-retail

https://www.mckinsey.com/industries/retail/our-insights/automation-in-retail-an-executive-overview-for-getting-ready

https://www.bls.gov/iag/tgs/iag44-45.htm

https://retailleader.com/why-low-unemployment-bad-news-retailers

https://www.insureon.com/blog/small-business-seasonal-worker-poll

https://www.retaildive.com/news/retail-leads-in-job-cuts-as-employment-holds-steady/552234/

https://riskandinsurance.com/its-surprising-which-industry-is-now-more-dangerous-than-manufacturing

 

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