Why waiting for the labour market to cool could leave you at a competitive disadvantage
Businesses struggling with high staff attrition and filling open positions in their workforce is an unfortunate workplace trend amid the biggest talent squeeze in history. Remuneration is, therefore, a topic weighing heavy on business leader’s minds.
New research from Gartner revealed that employers must think beyond salary increases and offers four bold compensation strategies to combat the war for talent.
“Many organisations are willing to take a less competitive approach to compensation while they wait for the labour market to cool down,” said Tony Guadagni, senior principal in the Gartner HR practice. “Yet, these organisations will find themselves at a significant strategic and operational disadvantage if demand continues as anticipated – especially as other employers offer higher base-pay salaries.”
A strategy that Stephanie Love, Director of Stephanie Love HR consulting disagrees with, “If employees don’t address pay first and foremost, they risk losing their key employees in critical roles and being unable attract people with the skills and experience they’re requiring,” Love told HRD. “Pay is a hygiene factor for most, if not all employees, and if that’s not perceived as fair, other benefits of working for a particular employer will make very little difference.”
Love believes that trends have shown the talent shortages are likely to continue well into the future, with no signs of slowing down, and if employers are waiting for this to decelerate, they may end up being left behind their competitors.
Gartner’s 4 Strategies to disrupt compensation-based competition in the war for talent
- Increase Compensation and Benefits
Traditionally, raising base compensation and benefits have been the primary way employers attract and retain talent. While this approach allows for a quick return on investment for roles that need to be filled immediately, it can be extremely costly and temporary.
In today’s highly competitive labour market, organisations planning to compete on compensation must be open to alternatives, such as variable pay tactics. HR leaders can utilise three different levers:
- Provide substantial signing bonuses: Signing bonuses offer an opportunity for employers to incentivise candidates more quickly and address immediate talent gaps.
- Offer lucrative benefits: Providing lucrative benefits, such as tuition reimbursement or retention bonuses, can establish a lasting differentiator in the market and signals long-term commitment to employees.
- Decouple pay and location: As more organisations adopt hybrid and remote work, decoupling pay, and location can improve an organisation’s competitive position.
- Pay with Time
Paying employees with time is quickly becoming a more common tactic among employers who can’t, or don’t want to, compete on compensation alone. The same March survey found 15% of organisations are experimenting with a four-day workweek or alternative work schedules, a 13% increase from 2019.
Organisations can differentiate themselves by providing employees with work schedules that offer greater work-life balance. One approach is to guarantee a maximum workload of hours for a task or role. Employers can also embrace radical flexibility, giving employees control over where, when, and how much they work.
Another alternative is to adjust compensation for hours worked – such as 80% of work for 80% of pay – with full benefits. This can provide long-term advantages and prompt manager creativity in job design.
- Invest in Internal Mobility
Employees’ focus on career progression and development may be deprioritised due to attractive pay offers. To remain competitive, employers must reinvigorate those needs by increasing investments in their internal labour market. According to a Gartner survey in June 2021, only 33% of candidates who sought out a new job in the past 12 months searched internally within their organisation first.
“HR leaders must accelerate internal promotions and backfill lower-level vacancies from the external labour market,” said Guadagni. “Adopting an organisational preference for internal mobility supports retention of key talent and reduces the time to fill for critical roles – lowering stressors for the rest of the organisation.”
- Widen Talent Pools
The pandemic has shifted many employees’ perception of their work and their workplace. For instance, an October 2021 Gartner survey of 3,515 employees revealed 65% of women report the pandemic has made them rethink the place that work should have in their lives.
To help fill critical positions, HR leaders can consider candidates from unconventional backgrounds that are seeking new career paths. Organisations should re-evaluate qualified talent and predictors of long-term success, including skills adjacencies, reducing or eliminating education requirements or location requirements.
Four things’ employers can do in terms of remuneration to retain and attract key talent from Stephanie Love.
- Have a strategic and consistent approach to remuneration
- Benchmark to validated and reliable market data sources. It’s worth spending the money to get access to robust market data survey data.
- Measure and commit to closing any pay gaps, including gender, ethnicity, and rainbow
- Understand why people are leaving or indicating to leave. Is it really remuneration or is it a culture issue? Throwing money at a culture issue is not an effective long-term solution