According to a survey conducted by Gartner, Inc, conducted on 157 executives in March 2022, it was shown that 63% of executives plan to make compensation adjustments to address high inflation. This development is expected when the current global economic landscape is considered. The need to improve talent retention is another factor that influences compensation adjustment.
Compensation remains a significant criterion employers use to increase their competitiveness in the labor market. Unfortunately, few companies are buoyant enough to continue reviewing workers’ compensation packages. A similar survey by Gartner of 150 executives in April 2022 showed that only one in five organizations intend to do more frequent salary reviews to account for inflation or increasing cost of living expenses.
Industry Insights noted that the top three concerns facing most industries in the last 12-18 months are finding qualified employees (73%), retaining employees (48%), and increased operating costs (36%). Going by fluctuations in the inflation rate, employers are undoubtedly having a tough time matching workers’ expectations when it comes to benefits and compensation. Although some employers try a less competitive approach to ensure higher retention rates until the labor market cools down, it may not be easy to sustain because other employers offer higher compensation.
Besides, Gartner also predicts that U.S. employee turnover will likely go as high as 20% later this year. Luckily, there are still practical steps that employees can take to manage the pressure to adjust compensation in the face of fluctuating inflation rates.
How Can Employers Navigate the New Talent Landscape?
Increase Base Compensation and Benefits
Using compensation raises to retain and attract new and existing employees is not new. But for a lot of companies, this can be costly to maintain. A practical alternative is to explore variable pay tactics using any of these three tactics:
- Signing bonuses: Employers can use signing bonuses to incentivize candidates more quickly and address immediate talent gaps.
- Competitive benefits: Instead of increasing base salaries, employers can stand out by offering employees lucrative benefits, such as full medical insurance and student loan repayment assistance.
- Decoupling pay and location: When employees enjoy the remote or hybrid work structure, businesses can consider decoupling income and location to improve their competitiveness in the labor market.
Encouraging Internal Mobility
Another opportunity that employers can leverage to deprioritize very attractive salaries is encouraging internal mobility. Many employees will indeed prioritize a progressive career over higher pay. Additionally, workers often look for opportunities within their organizations. According to a Gartner survey in June 2021, 33% of candidates looking to change jobs in the past 12 months searched internally within their organization first.
This is an opportunity for employers to increase employee retention and remain competitive in the labor market. Aside from accelerating internal promotions and easily back-filling lower-level vacancies, adopting internal mobility allows retention of top talents and reduces the time and stress associated with filling critical roles.
Paying with Time
Another tactic employers use today is compensating workers with a better work-life balance. Some employers are already implementing a 4day work week or alternating workers’ schedules. This increases workers’ control over when, how, and how much they work.
Another approach is compensating workers based on the time they work. For instance, if they do 80% of the work, they get paid 80% of pay, but with full benefits. This can prompt workers to improve their productivity.
Consider Talents from Unconventional Background
Gartner surveyed 3,515 employees in October 2021 and discovered that 65% of women said the pandemic made them rethink “the place that works should have in their lives.” To widen the talent pool and fill critical positions, HR managers can consider hiring workers with unconventional backgrounds. This can include reducing the required qualifications to fill a particular role and eliminating location barriers.
Robust Healthcare Insurance
Another thing employers in the U.S should be paying closer attention to is the disproportionate cost of quality health coverage across the country. Thompson Aderinkomi of Benefits Pro had, earlier in 2020, discovered that states with higher incomes and cost of living had lower levels of employee contributions to health insurance than high health insurance premium states in 2020. Aderinkomi noted that many employers have often overlooked the number of disposable income employees have after paying for their contribution to health insurance and how it compares to other markets.
Hence, in states with the lowest cost of health insurance, the amount an average family spends on things like childcare, transportation, education, and entertainment varies from other locations. Instead of focusing only on competitive wages and a competitive benefit set, employers can implement strategies that lower the cost of insurance premiums and decrease employee contributions in line with the average salaries and cost of living in their respective local markets.
Dedication to Culture
It’s no secret that company culture has become a significantly important aspect of the workplace these last few years. Toxic, micromanaging workplaces are a thing of the past and a positive company culture is considered as important by workers and the other compensation they are receiving. To build a team that values your workplace as much as you do, hire for culture using the Workzinga Culture Fit Assessment. Want to learn more? Contact us today!