What’s Weighing on Hourly Workers? (Hint: Pay Is Just One Concern)

According to new Mercer research, hourly workers trail their salaried peers when it comes to career advancement opportunities, being able to afford healthcare and avoiding financial hardship — and they more frequently believe they are not being compensated fairly.

As a result, they are 10% less motivated than salaried employees to go above and beyond in the workplace, with engagement among hourly workers dropping in almost every industry compared to last year.

The pain points facing hourly workers are significant, particularly when it comes to financial strain. Mercer found:

40% do not feel fairly compensated (increasing to 47% among workers earning less than $60,000 a year) — compared to 22% of salaried employees who feel the same.
37% said healthcare costs are a significant burden on their financial well-being, compared to 17% of salaried employees.
63% do not feel confident in their retirement readiness, compared to 37% of salaried workers.
76% said inflation is hurting them financially, causing 54% to reduce their discretionary spending and 41% to reduce savings or dip into personal savings.

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How to Set Up Rewards Tailor-Made for Hourly Employees

Why Is This Happening?

Base compensation aside, one of the challenges unique to hourly employees is the reduced likelihood of receiving employer-provided health and retirement benefits.

“The world we live in has become more expensive,” said Ethan Salk, a principal for employee research and engagement at Mercer. “If you’re independently responsible for financing your retirement or finding health coverage and other benefits, it’s just a different animal.”

Hourly workers are likely making more money today than they did before the COVID-19 pandemic, but that’s not enough to turn the tide, said Michael Spataro, the chief customer officer at Legion Technologies, a workforce management company targeting increased hourly worker engagement.

In its “2024 State of the Hourly Workforce report,” Legion found only 50% of hourly workers believe their employer cares about creating a good work experience for them, and 41% said their companies have not taken steps to improve their workplace in the past year.

And, the consequences may be severe for employers — 50% of hourly workers Legion surveyed plan to leave their jobs within the next year, with that number rising to 76% among employees aged 18 to 24.

“It’s clear that most [hourly] employees feel that their employer doesn’t appreciate them,” Spataro said. “When you look at the amount of unionization starting to happen in the workplace today, that’s not happening because you’re providing the best benefits and the best experience. It’s happening because the employees feel like they’re being taken advantage of or not being valued.”

Both Salk and Spataro agree inconsistent or inflexible schedules, the inability to work remotely as commonly as salaried employees, fewer career development opportunities and a lack of tailored recognition programs also contribute to the gaps in satisfaction and motivation for hourly workers.

Alleviating the Gaps

One way to address hourly workers’ unique needs is through the concept of “microdosing,” said Hannah Yardley, the chief people and culture officer at Achievers, an employee engagement and recognition company. Hourly employees are more likely to work different shifts, work part-time or experience higher turnover — so distributing rewards, recognition, variable pay, feedback requests and training opportunities in smaller, more-frequent intervals may make more sense for them.

“An hourly worker is still really hard to retain and really expensive to recruit,” Yardley said. “Look at the idea of microdosing recognition, rewards and their voice in feedback modules. That allows you to create a pulse of what that workforce is looking for on a much more regular basis, and it’s a helpful way to support the hourly workforce because of some of the unique factors facing them.”

Compensation isn’t the full equation when it comes to keeping employees, Yardley said, particularly when it comes to hourly employees, who may receive comparable rates of pay in similar positions from one company to the next. For those workers, the differentiating factor in accepting and remaining in a role likely is their daily employee experience — recognition, feeling appreciated, a culture of support and opportunities to grow.

Improving the hourly employee experience — through schedule flexibility, targeted rewards, meaningful recognition, and training and career pathing — should be an urgent goal for total rewards professionals and businesses, Spataro said.

“If you don’t create the best possible employee experience, there’s no way you’re going to provide the best possible customer experience,” he said. “If the employee doesn’t feel they’re getting trained properly or getting training opportunities, if their schedule isn’t flexible or they feel scheduling is unfair, if they don’t have instant access to their wages — all those elements are causing them unnecessary stress that they’re bringing into the work environment, and that’s affecting your customer experience. Those employers that really invest in the employee experience are the employers that will be successful in the long run.”

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