Two young beautiful female workers are discussing how to improve production of the factory.

On the sales side, things are looking up for U.S. manufacturers. A new report from the UKG Workforce Institute notes that 83% of manufacturers had year-over-year revenue growth, 33% of which experienced significant increases. 

Despite this good news, the report, based on survey responses from more than 300 HR leaders at U.S.-based manufacturing companies, highlights the industry’s ongoing struggle to stay adequately staffed and fill skills gaps. But efforts to boost employee recruitment and retention are beginning to turn the tides.

Facing costly turnover

More than 75% of manufacturers are finding it difficult to fill critical labor gaps, with many (66%) reporting that it’s taking them longer than usual to fill open positions. Over the last year, most manufacturers experienced an increase in employee turnover (62%) and unfilled jobs (57%), and 54% report that their annual rate of turnover was more than 20%. 

That turnover is costly, too, with most surveyed HR leaders (66%) noting an average cost of $20,000 to $40,000 to replace one skilled frontline employee. For many manufacturers, turnover has moderately (47%) or severely (22%) impacted their bottom-line finances.

The situation does seem to be improving compared to last year, however. The percentage of manufacturers reporting that they’re understaffed decreased from 38% in 2022 to 28%. And quits are lessening for some — more than 40% of manufacturers reported that their frontline managers rarely quit, up from 20% last year. 

Building the talent pipeline 

Three in four manufacturers said they believe negative industry perceptions are hindering their recruiting, and they acknowledge the need to be more active with local communities and students to help change that perception. But only 25% participate in the Manufacturing Institute’s annual MFG Day to educate students about modern manufacturing careers, and just 31% currently partner with local high schools or community colleges. 

Though they may be missing out on hiring new graduates, many manufacturers have hired workers who were laid off from tech (50%) and those without manufacturing experience (46%). Fewer have hired people with past convictions (28%), refugees or immigrants (28%), and retirees (27%). 

Nearly 90% of manufacturers believe diverse teams are often “more creative and innovative,” and 39% said diverse hiring is a high priority. However, few are proactively working to boost representation from: 

  • LGBTQIA+ candidates (38%)
  • Underrepresented racial or ethnic groups (33%)
  • Candidates with physical disabilities (25%)
  • Women (24%)
  • Neurodiverse candidates (22%)

Retaining frontline workers

Turning back turnover will require manufacturers to focus on upgrading the worker experience. And the survey identifies several areas where they can improve. 

Although the vast majority (92%) of manufacturers say their frontline workers have “the same benefits” as corporate employees, a closer look at specific benefits paints a different picture. Benefits like flexibility and paid time off are critical to helping employees with work-life balance and encouraging them to stay with their organization, yet only 44% of surveyed manufacturers offer flexibility to their frontline employees and the ability to pick up and swap shifts. Even fewer provide predictable work schedules (34%) or paid time off (28%). Training and development is available to only 50% of frontline staff working for surveyed manufacturers, and less than half (46%) get employee wellness programs. 

Manual processes are also weighing employees down and impacting retention rates — most (68%) manufacturers say their company is lagging in its support of the frontline employee experience with mobile technology.

The good news is that most manufacturers are aware of these issues and are making efforts to do better. Three in four have raised the starting salary for frontline workers year-over-year, and 65% raised pay for hourly employees. Almost 90% report that their company is proactively gathering new ideas on process improvement from their frontline employees and striving to provide them with more flexibility.

To learn more about how the manufacturing industry is addressing frontline labor challenges, see the full report.

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