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Manufacturing and Distribution Industry: Managing the Skilled Labor Shortage in the Post-Pandemic Environment

Steven P. Feimster, CPA
Steven P. Feimster, CPA Director, Audit & Accounting, Manufacturing & Distribution Industry Group Leader, ESOP Specialty Area Leader

It is no secret that businesses in our region and across the nation are having difficulties in filling open job positions in their organizations. For manufacturers, this is not a new challenge, as the industry has been experiencing a skilled labor shortage for years. Baby boomers have been gradually retiring, while the numbers entering the trades and technical schools have continued to decline. These trends were exacerbated by the pandemic and its aftermath.

Kreischer Miller’s 2021 Greater Philadelphia Manufacturing and Distribution Survey identified the skilled labor shortage as a top barrier to growth (bested only by the recent pandemic-induced supply chain disruptions), cited by 75 percent of respondents (nearly 50 percent more than in 2020). They also cited it as the largest anticipated challenge over the next five years.

The question is: what can or is being done now to help alleviate this challenge in the near-term?

Kreischer Miller recently hosted a series of roundtables around this topic. Following were the common themes, methods, and techniques shared by the business leaders who participated in these discussions.

Employee retention is the key first step. While retirements (both planned and pandemic-related) will continue to happen, employers are increasingly at risk for losing some of their remaining talent to their competitors who are facing the same labor shortages. To help combat these lateral moves within the industry, manufacturers and distributors are utilizing retention and “stay” bonuses more frequently, as well as early and interim pay raises across their organizations.

Recruiting and hiring are indeed more difficult and more costly. While word-of-mouth is still widely used to fill open positions, recruitment firms more typically associated with executive and management roles are increasingly being used. Higher starting salaries and signing bonuses (both one-time and staggered over time) are also prevalent in the current environment. Employers are also incentivizing word-of-mouth practices through more frequent and higher paying referral bonuses.

Vaccination status may matter, but it can be tricky. The pandemic has created another dilemma with employers: voluntary vs. mandatory compliance regarding vaccination of employees.

While manufacturers quickly and effectively adopted CDC pandemic guidelines for the safety of their employees, a fully or mostly vaccinated workforce – while likely ideal and certainly preferable in many situations – has proven more difficult to achieve. Methods to achieve voluntary compliance have included such perks as vaccination bonuses, gift cards, and additional paid time off. Company-mandated compliance has largely been avoided, as it would likely lead to loss of those employees who refuse to be vaccinated.

Interestingly, a government-mandated compliance ruling like the recently issued OSHA guidelines would seemingly get many employers off the hook. However, this could lead to employee defections from larger company to smaller companies unaffected by such a mandate.

These are just some of the ways that our local manufacturers and distributors are trying to manage the labor crisis right now. Of course, the longer term solution continues to include a combination of refilling the candidate pipeline by 1) changing the attitudes around careers in skilled labor positions and encouraging youth to consider trade and technical educations, and 2) increasing investments in automation and advanced manufacturing technologies to reduce the numbers of laborers or attract younger talent into the manufacturing industry.

Steven Feimster can be reached at Email or 215.441.4600.

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Steven P. Feimster, CPA

Steven P. Feimster, CPA

Director, Audit & Accounting, Manufacturing & Distribution Industry Group Leader, ESOP Specialty Area Leader

Manufacturing & Distribution Specialist, Owner Operated Private Companies Specialist, Private Equity-Backed Companies Specialist

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