Four strategies to hire and retain top talent despite the challenging labor market.
The economy added over 943,000 jobs in July, according to the U.S. Department of Labor, well ahead of economic forecasts. In August, the U.S. unemployment rate was 5.4%, down from 5.9% in June, a significant monthly drop, and average earnings are up 4% from July 2020.
Despite all this positive news, if you are an employer trying to hire, you are most likely not smiling. 2021 has brought a significant labor shortage that has impacted employers across industries and occupations.
Here are some strategies you can adopt to help you meet those challenges:
1) Don't blame it on COVID-19. Many of the factors influencing current labor shortages existed before the pandemic. The working-age population of the U.S. has been shrinking for a while now, and the lack of affordable, available child care and parental leave has kept many parents out of the workforce.
Extended federal unemployment benefits, which expired in September, have been widely blamed for incentivizing reluctance to return to work. However, more than half of U.S. states have already ended this extension with no reported impact on the availability of qualified workers.
2) Understand and address salary compression. This occurs when the salary relationship between two or more employees is too small to be equitable. A common example involves a new hire that demands more than current employees performing the same work. If you really need this new hire, you pay them what they are asking and then figure out how to manage that internally.
There's no easy, single solution to resolve this situation. Some strategies that do help include standardizing pay practices and eliminating out-of-cycle salary increases; creating promotional paths and career ladders for experienced employees; and attracting new hires with a combination of base salary plus signing, performance or attendance bonuses to minimize internal equity issues.
3) Get rid of old policies. It's not too early to discard some out-of-date policies that simply don't work in the current environment. Now is the time to get rid of annual salary reviews, across the board pay increases of 2%-3%, and giving out-of-cycle increases in response to individual employee asks.
Instead, it's time to think about year-end planning. Some things to focus on now include an analysis of current pay levels to identify both external competitiveness and internal equity issues; research of market competition; and analysis of turnover and recruitment statistics.
4) Retain more to recruit less. One of the best ways to avoid the recruiting headaches of 2021 is to keep the employees you have. An early 2021 Prudential Pulse of the American Worker survey reports that 26% of surveyed employees plan on leaving their jobs this year.
Of those, 80% cited lack of career advancement as a reason, 72% said they were rethinking their skills and careers, and an overwhelming number wanted more flexibility in scheduling and work-from-home options. These, of course, are in addition to pay, benefits and management issues that always make the list of why employees leave.
All of this can seem overwhelming, but recognizing your employees and thanking them for their contributions is a good place to start.
Susan Palé is vice president for compensation at Affinity HR Group Inc. Affinity HR is the endorsed HR partner of Big “I" Hires, the Independent Insurance Agents of Virginia, Big I New York, Big I New Jersey and Big I Connecticut.