Warehouses are expanding all over the globe, and with it the demand for workers has also seen a sharp increase. Services are expected to keep growing over the next five years at a compound annual rate of 6% which means warehouse labor will likely remain as much in demand as ever.

This unprecedented demand has led to side effects like wage increases and aggressive HR tactics to attract workers away from competitors. In fact, warehouse associates were among the top nine jobs with the fastest wage growth last year, with a 6.7% median wage increase according to a study by Glassdoor.

Source: WSJ

In e-commerce fulfillment centers, labor supply is even more in demand due to the higher number of workers required per square foot. In a non-fulfillment operations warehouse, the typical number is one worker per 1,500 to 3,000 feet whereas e-commerce fulfillment operations require one worker per 700 to 1,000 square feet.

However, the challenges of recruitment and retention aren’t just limited to having big numbers to fill. A variety of reasons make the task tricky, including:

  • Sheer demand for labor due to growth of e-commerce
  • Warehouses located in concentrated areas, driving up competition and limiting labor pool
  • Importance of branding and word-of-mouth for warehouse work
  • Hard manual labor less appealing to many jobseekers  

Why Finding and Retaining Workers is a Challenge

Even a big name brand like Amazon isn’t immune from the challenges of finding enough labor for fulfillment centers. During its much-publicized ‘Jobs Day’ in August, the company received 20,000 job applications which fell drastically short of their goal of 50,000.

Apart from having very big warehouses to fill, supply chains struggle to find and keep labor for several reasons. It’s hard to make hard manual labor attractive to prospective jobseekers, particularly in concentrated areas where many competing warehouses are located.

The concentration of jobs in medium-to-large metropolitan areas drives up competition and wages, making warehouses compete for a limited pool of workers in the given area. Compared to retail employment, for which small metro or rural areas account for 23% of jobs, only 13% of e-commerce work is distributed across small cities and rural regions.

Source: NY Times

This cluster of warehouses in a limited area naturally leads to companies competing for the same pool of jobseekers. Wage increases help make the jobs more attractive, but the struggle to fill warehouses still remains since all warehouses can increase wages; the competition stays even as low wages fall away.

Once the number of available jobs surpasses the amount of job applications and increased wages aren’t enough to lure away workers from competitors, other recruiting tactics come into play. Warehouses often rely on word-of-mouth from former or current workers for hiring workers who don’t always have previous work experience. This means branding and reputation are crucial for attracting new recruits.

Since warehouse jobs demand hard physical labor from workers – a fact which can turn off some jobseekers from the start – good wages simply aren’t enough when it comes to improving retention. With no other benefits, workers can abandon ship as soon as a competitor offers a higher wage, resulting in a high turnover rate. Other factors, such as the fair treatment of workers, flexibility of shifts, a good warehouse facility, and benefits like sick days and gas cards matter.

“A guy who makes $10 an hour, you offer $10.25, he’s going to leave.” -Tom Landry, President of Allegiance Staffing [Source: WSJ]

What To Do When a Higher Wage Isn’t Enough

Competition is so fierce in this field that when SHRM Online reached out to HR managers for an interview, many of them turned it down, citing concerns about “revealing best practices and insights.”

Though there’s no one magic answer to becoming the best employer, companies by and large are employing similar tactics to improve recruitment and retention. From bonuses and flexible schedules to creating a friendly workplace culture, warehouses are stepping up efforts to become favored employers and engaging workers to keep them happy.

Bonuses, Gift Cards & Gas Cards

Such is the challenge of warehouse worker retention that UPS now offers a weekly retention bonus of $150 for its package handlers in Louisville – a major hub for fulfillment centers – in an effort to keep them away from competitors.

At Radial, employees receive $200 attendance bonuses during holiday seasons and $100 gift cards from Zara. Other types of bonuses like sign-ups and referrals are common as well; referral bonuses in particular serve the needs of both the workers and the employers since warehouses are often short on reliable labor.

Interestingly, some managers noted that “a gas card has more value than a 401(k)” when it comes to benefits. For many workers who are just starting out and don’t have a lot of experience, more immediate benefits like bonuses, gift cards and gas cards do more to alleviate their financial needs and seem more appealing than long-term benefits like a 401(k).

Flexible Shifts and Paid Breaks

When financial incentives aren’t enough, workplace conditions can do a lot to improve retention. Flexible shifts allow workers to schedule their own hours to accommodate for various personal needs, and open up the labor pool to a wider range of workers including working mothers, retirees and those with second jobs.

Paid lunch breaks also work significantly on worker retention. According to Holly Courter, Senior HR Manager for a Romark Logistics unit, workers at the warehouse remain on the clock during lunch, in addition to the ability to choose their shifts between 8, 10, and 12 hours as well as weekend options. All this helps to keep workers happy and prevent them from leaving for their competitors.

A Worker-Friendly Culture

Other warehouse HR tactics aren’t so different from those employed at white collar workplaces. A worker-friendly environment that places the personal needs and concerns of warehouse workers first goes a long way in building a solid reputation as a top employer.

Engaging with workers one-on-one, flexible policy that doesn’t make workers fear losing their jobs over an unforeseen situation, sufficient time to break for lunch, attention to safety guidelines, and clearly communicating expectations are all part of a retention strategy that makes for an attractive workplace.

In an environment where consumer demand is constantly driving up labor and competition, a healthy workplace culture is perhaps the number one factor for ensuring higher warehouse worker retention, reducing turnover rates, and becoming a favored employer.