HR Focus
Talent retention strategies in the face of the Great Resignation, wage inflation and the cost-of-living crisis
Rising costs are posing greater challenges for companies’ people strategies. Amid continuing uncertainty, HR leaders need to know what they can do to keep existing talent on board and recruit the right people into their organisations.
On 13th September, members of our HR and CFO clubs were treated to an in-depth discussion of these themes by Neil Carberry, chief executive of the Recruitment & Employment Confederation, and Ian Milton and Gaby Joyner from Willis Towers Watson.
Attracting and retaining talent: the current labour market
Data shows that although UK unemployment has dropped down to pre-pandemic levels, the workforce has shrunk and the average amount of hours worked per week has dropped by around 11 million since February 2020. Effectively, there are fewer jobs to go around, but less work is being done.
Although this is due in part to cyclical trends like more staff off sick, many of the changes in the labour market are driven by more fundamental, secular changes. To adapt to this new reality, financial and HR leaders need to take stock of their current procedures and consider how to revise them to meet current employee expectations.
Financial and non-financial incentives to keep talent on board
Adjusting wages: the implications for talent retention
Although salary budgets tend to be higher nowadays, most companies cannot afford to raise their salary budgets to keep pace with inflation for all employees.
To keep employees satisfied whilst staying on top of their budgets, HR leaders need to identify which talent they are most at risk of losing out on, and therefore, where a salary increase will make the most difference: are people leaving the organisation en masse? If not, then which parts of the company seem the most resilient? Which ones present the greatest retention risks?
More importantly, in the face of rising inflation, it is the lowest-paid employees who stand to lose the largest share of their take-home pay – so they need to be identified as the priority group for a raise in any salary review.
If managers are unsure how much pay rates should change by, they can start by conducting a quarterly scan of the market. This is a far better approach than the traditional end-of-year salary review, which leaves too much time for company benefit packages to fall behind those of their competitors.
Defining ‘rare’ skillsets
When recruiting for jobs with specific skillsets, managers are too often prepared to hire people straightaway without considering whether a profile is actually a good match. If a job requires certain ‘rare’ or ‘hot’ skills, they need to spend time working out what these actually entail. What is the purpose of the job within the organisation, and what value does it bring? Putting more effort into considering this will save disappointment later on.
Other mechanisms to promote employee wellbeing
Given the difficulties in managing pay rises, more and more organisations are promoting additional employee benefits which save them money as well as offering an enhanced employee experience. These include enhanced learning and development programmes, a more flexible home working model, and increased paid leave. Employers can even turn to current third parties providing external benefits like health insurance, to ask them if they can improve their current offer. Greater emphasis on these schemes seems to be a trend that will last into 2023.
A sizeable proportion of employees remain unaware of what benefits they are actually entitled to. Improving communication about all the benefits provided, and how to make the most of them, can go a long way towards increasing their satisfaction without requiring further investment from the company.
Transparency to keep employees on side
When managers announce changes, it is crucial to be up-front and transparent: not just about the developments proposed, but about the rationale behind them.
For example, if only certain parts of the organisation stand to benefit from salary increases, or if different groups will get different levels of increase, the organisation needs to communicate why this is. Millennials and Gen-Z employees tend to discuss their salaries more openly with colleagues, and value transparency very highly – so effective communication is key.
This logic also extends to recruitment. Employers need to be honest with prospective employees about staff benefits – even if this means admitting that they might not be able to provide them with everything they are after. Transparency from the beginning will build trust that lasts.
Nurturing a positive employee experience
Overall, employee experience needs to be considered in a holistic way. Companies need agile solutions to determine what their workforce wants and needs, and then decide what changes to implement in response. A one-size-fits-all approach is no longer viable: they need to consider who most needs what the most.
Financial rewards might have some short-term impact, but they will not be enough in the long term. The most important thing is the overarching story that the company tells: what benefits they are promoting, how these work in practice, and how it all makes for a healthier workplace.