Editor’s Note: As 2021 winds down, a tight labor market, inflation and various other compensation concerns are confronting organizations amid salary budget planning and financial forecasting for 2022. For these reasons, Workspan Daily’s “Compensation Crossroads” series will provide current salary data, expert insights and actionable plans to better prepare compensation professionals during this tumultuous time.
Employment growth was slow in November, with only 210,000 jobs being added to the American economy.
That number fell short of economists’ expectations, but there still seems to be more available positions than there are people to fill them.
The U.S. economy has had more than 10 million open jobs since June of this year, the Wall Street Journal recently noted, calling the current jobs situation “an extraordinary stretch of imbalance in the labor market.”
The same WSJ piece cited early November figures from the jobs site Indeed, which projected 11.2 million U.S. job openings at the beginning of last month, exceeding the number of unemployed workers (7.4 million) in the American labor force in November.
Such numbers are not lost on job seekers, who know they have options in an increasingly labor-friendly employment market. They also don’t escape the discontented employees lingering within every organization, who see now as an opportune time to seek out other opportunities. Others are feeling increasingly emboldened to just up and leave their current employer without even knowing what their next career step will be.
Compensation is obviously playing a part in many employees’ decisions to seek new jobs, as is always the case. So, from a compensation standpoint, what can companies do to attract the best talent and retain the talented workers still there?
“With exceptionally high levels of churn in the labor market, organizations need to take a segmented approach to remain competitive,” said Tauseef Rahman, a partner and career business leader at Mercer.
Blanket market budget increases won’t address the unique challenges companies currently face, said Rahman.
“This requires consideration of your current competitiveness and criticality of roles. Knowing which skills have high demand in your organization, high demand in other organizations, and low supply is a first step to prioritizing investments.”
Pay equity is also an important consideration, he added, “to ensure that new hires do not cause existing employees to be paid unfairly.”
Equitable pay is only part of an equitable work experience, though. And there are elements of the employee experience that go beyond compensation to make workers feel valued when salary increases alone aren’t enough, or when they simply aren’t in the budget.
Sue Holloway, director of executive compensation strategy at WorldatWork, sees increasing other forms of compensation — hiring bonuses, retention incentives, equity grants — as difference-makers when small or no salary increases are in the cards. Likewise with improving benefits and working conditions, in the form of increased flexibility, modifying and improving work schedules and reducing hours, for example.
She also sees ways to expand the candidate pool as a way to find much-needed talent.
“Leverage geography (remote work) and pull from other industries,” said Holloway. “Workers have skills that transcend traditional industry boundaries.”
Ultimately, “pay still matters — a lot — but it’s when the broader employee experience falls short that employees will start to shop their options,” said Rahman.
The pandemic has left employees feeling burned out and exhausted. In response, employers “need to examine ways to support their employees’ unmet needs, deliver more compelling jobs and create more flexible work environments,” he said. “These are all especially important if the organization does not have the money for salary increases.”
Brad Hill, a compensation consultant and principal at Clearwater Human Capital, “like[s] to think that there’s a compensation solution to attraction and retention, but the role of compensation has its limits.”
If an organization pays at the 50th percentile, for example, one out of every two companies pay more than they do. If a company pays at the 75th percentile, the same will be true for one out of every four employers, and so on.
“There will always be companies that pay more, and if pay is the primary driver of a high performer’s satisfaction, consider them gone,” said Hill. “They will always be able to find higher pay elsewhere.”
Hill echoes Rahman’s sentiment that compensation isn’t all that counts for most employees. But he points out that pay will be more critical to some than others.
For instance, “pay is everything” for entry-level workers “who are trying to put food on the table,” he said. “We need to pay these employees a living wage before we can sell them on the benefits of the employee value proposition [EVP].”
By and large, however, organizations need to focus on their overall employee value proposition, “the non-compensation reasons that employees come to work there,” Hill continued. “The work culture, the job design, the company brand, the organization’s concern for their growth and development — these are the ways to attract and retain talent. The EVP must be properly defined, packaged and actively marketed.”
About the Author
Mark McGraw is the managing
editor of Workspan.