Are your recruitment efforts accounting for inflation?
Competing with remote-first companies, finding top talent in a job seeker’s market, and record inflation are at the top of every recruiter’s mind as many struggle to attract and keep employees in these uncertain and unstable times.
The U.S. inflation rate recently soared to 8.5% – the highest it’s been since the early 80s, which is driving the demand for higher wages. On top of that, the fight for talent is fierce. The number of Americans collecting unemployment is at its lowest since 1970, with companies posting a record-high of nearly 12 million jobs in March 2022. In April, Reuters reported that U.S. job openings “fell slightly, but remained at significantly high levels”. This trend indicates that wages would continue to rise as companies remain unable to sustain their talent pipelines.
Job seekers also recognize the power they hold – with 4.4 million joining the great resignation in April to seek out new opportunities with companies willing to shell out higher pay, flexible work options, and more. While we remain unsure of when things will stabilize, here are some creative ways to keep your competitive edge in the talent marketplace.
Retain your existing talent
According to a Chicago Federal Reserve study, employees who resigned or started looking for new jobs contributed to inflation by 1% in 2021. Instead of staying it out, workers have left their jobs as part of the great resignation, confident they will find better opportunities elsewhere. This obligates businesses to provide substantial pay increases.
What can companies do to retain the talent they already have? While wage increases to account for inflation are critical, there are other options to keep existing talent:
- In February, The Wall Street Journal reported that companies are getting rid of annual pay raises. They will instead review pay rates frequently to stay competitive.
- Employers that currently cannot provide salary raises are offering one-time bonuses to keep employees and show that they recognize their rates aren’t keeping up with inflation.
- Steve Nyce, a senior economist at consulting firm WTW, recently noted that companies are now expanding their benefit packages in order to secure in-demand talent. “In many cases,” he says, “employers are responding by boosting pay, enhancing health and retirement benefits, and offering more flexibility to not only find workers but also keep the ones they have from looking elsewhere.”
- Don’t underestimate the power of recognition beyond compensation and essential benefits and its link to retention. Studies show that an employee who has been recognized is 63% more likely to stay at their current job within the next three to six months. In fact, “over 91% of HR professionals believe that reward and recognition make employees more likely to stay,” according to SHRM research.
Wages need to account for inflation
Politico explains that while salaries are increasing, they’re not growing fast enough to keep up with inflation and the spike in consumer prices. According to the U.S. Bureau of Labor Statistics (BLS), the inflation-adjusted average hourly earnings fell nearly 3% from March 2021 to March 2022, while the consumer price index (CPI) shot up by 7.9%.
Workers expect raises to account for inflation, but this surge in pay has created a gap between new and existing employees. Many employers are reviewing wages to ensure the salaries of their tenured employees matches that of new hires brought in at higher salaries that do account for inflation.
Target talent pools in smaller cities
While experts explain that the geographic wage gap is shrinking in the U.S., new research suggests that companies can still save by hiring employees in cheaper cities. Another factor is remote work. Allowing employees to work remotely can open up a more affordable talent pool.
Instead of hiring engineers from Silicon Valley, you can now hire someone in a smaller city and allow them to work remotely. Geographies are levelling out a bit with pay, so you may not get the pre-pandemic geo-specific labor discounts, but you can find slightly cheaper labor in small- and mid-market areas.
Get creative with employee offerings
Some companies can’t afford to offer the big tech salaries that Silicon Valley companies or corporate conglomerates can. But you can get creative with what you offer employees to attract and retain them, especially during the great resignation.
- 401(k): A Betterment survey of 1,000 full-time employees found that 65% of workers would leave their job for a company that offers a 401(k) plan and 56% said they would leave for a 401(k) matching program, so if you can increase matching, do it.
The other benefits that employees said they would switch jobs for include a Flexible Spending Account (FSA)/Health Savings Account (HSA), an employer-sponsored emergency fund, and student loan payment assistance. Organizations that are in a position to offer these compelling and in-demand benefits should consider doing so.
- Financial wellness: The same survey revealed that 78% of employees are looking for employers that offer financial wellness benefits, with nearly 70% prioritizing these benefits over an extra week of vacation.
- A benefits package that reflects inflation: Do you offer remote work to offset the skyrocketing gas prices? Do you offer a stipend for public transportation if you require employees to come into the office? Salary is just a part of the total compensation package – companies need to address the entire employee experience to hire and keep top talent. This includes childcare, vacation, health care, and more.
In February, Denise Stefan, president of HR services provider Engage PEO, commented that employers should allocate more compensation towards employee benefits to offset inflation. She explains that with health insurance, the employer-paid portion is not considered taxable income for employees, so their dollars go further there than as direct compensation, she explains.
- Be flexible: Thanks to the pandemic, remote work has become the new normal. Many employees expect to work a remote or hybrid schedule, but if you can’t offer that, you can still create a flexible environment that caters to employees. Consider offering transportation services (or stipends) to reduce gas usage or shift schedules for a shorter work week.
Your talent is your competitive edge
Talent has always been what sets an organization apart from its competitors. Yet now more than ever, hiring and retaining the best is crucial. With the great resignation, soaring inflation, and a highly competitive labor market, companies must go above and beyond to remain competitive.
Job seekers now dictate their benefits and pay, knowing they can find better opportunities in this highly competitive market. If you want to keep up, you’ll need to adjust salaries for inflation and reconsider flexible work environments, benefits, and more.
At Resource Solutions, we understand the market and work with the best talent pool available to staff enterprises with employees who will keep their businesses competitive. If you want to hire and need help getting started, contact us.