- A talent shortage in the retail sector. At least one million retail jobs are unfilled right now, according to recent Bureau of Labor Statistics data.
- Large retailers leveraging compensation to attract and retain talent. The Home Depot and Walmart are two recent examples of retailers tapping compensation to stay competitive in a tight labor market.
- Total rewards should be utilized more. Experts say compensation professionals should use more than just money to attract and retain retail workers.
While recent news headlines may focus on the mass layoffs in the technology sector, the opposite seems to be occurring in the nation’s retail sector, where a hiring crisis is evident to anyone who has recently shopped in a store.
The roots of the problem are easy to trace: At the end of last year, one million retail jobs went unfilled, according to the Bureau of Labor Statistics. What’s more, in January, the overall unemployment rate fell to 3.4%, showing that retailers face stiff competition for talent not only from each other, but from employers in other areas of the economy as well.
There is a sense from economists that the competition for labor could become less fierce in the second half of 2023 and a report from Challenger, Gray and Christmas Inc. illustrates a slowdown from a year prior, as retail employers said they planned to hire 615 employees, down significantly from 5,901 in January 2022.
However, in the interim, a fight for talent remains, and experts say that rewards leaders can play a pivotal role in helping to fill staffing shortfalls in the retail sector.
As a result of the increasing competition for talent, some of the nation’s biggest retailers are increasing their compensation.
Walmart, the nation’s largest private employer, recently announced it would raise its minimum wage to $14 an hour for store employees, and will soon have an average U.S. hourly wage of more than $17.50. The Home Depot announced that it will spend $1 billion on hourly wage increases, in an effort to hire more hourly workers.
With upward price pressure from companies like these, the challenges for compensation and rewards professionals in the retail sector are only accelerating, said David Kopsch, senior principal at Mercer.
Kopsch said the sector has for years over-relied on two maxims: 1) pay a steady wage; 2) wait and see. But he can see a new day dawning for retail employers.
“Now retail is a lot more dynamic and similar to high tech in terms of the levers that can be used as an opportunity to entice workers — from compensation and incentives to insurance and training,” Kopsch said. “The rewards professional has to look holistically at the total rewards mix to ‘make it matter’ for the worker.”
He also encouraged compensation professionals to focus on better understanding the needs of their current employees, since it’s less expensive to retain than to hire. “Your tenured people have years of experience and you want to retain them because they know what’s working,” he said.
Go Beyond Compensation
While offering competitive base pay remains critical — especially in an era of pay transparency, in which employees can readily see if roles don’t make financial sense for them to pursue — it’s important to remember that non-monetary rewards are just as important, said Justin Sun, a global compensation advisor with ExpediaGroup.
He added that industry research shows that investing in employees’ long-term career development and growth is essential, especially since many employees don’t anticipate being frontline retail workers their entire careers. “Helping them see how your firm can upskill them for both the work they’re interested in and the jobs of the future can go a long way in attracting and retaining them,” Sun said.
If you can’t afford expensive training options, lower priced alternatives may still be effective. “Offering an eLearning subscription that allows employees to improve their language and technical skills, for example, could be one way to show your commitment to investing in employees long-term,” Sun said.
Since the retail sector historically has been slow to adopt and embrace technology, Kopsch said rewards professionals should be “listening, learning and researching” what’s coming in terms of technology for the worker and work experience. “Just be prepared for what the future holds.”
And don’t rule out low-tech, high-touch rewards. Sun said that “daily standup meetings where you recognize employees one-on-one and publicly for going above and beyond can have a significant positive impact on morale, especially when burnout and mental health concerns are on the rise.”
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