The Great Resignation is real! During 2021, an average of nearly 4 million workers quit their jobs each month, the highest record on average since the Bureau of Labor Statistics (BLS) began tracking workers who quit their jobs more than 20 years ago.
Businesses and non-profits are looking for ways to stem the tide and attract new talent in a tight labor market. I have received an uptick in inquiries lately from clients interested in performing a compensation study either because they have experienced increased employee attrition or because they want to act before they do. Across the board, companies have concerns about attracting and retaining the right talent.
The bottom line is demand for talent is outpacing supply and compensation is rising as a result. In broad terms, we can look to the Bureau of Labor Statistics Employment Cost Index for a sense of the overall trend in increasing compensation.
The BLS recently reported that wages and salaries of private industry workers increased 5.0% for the twelve months ended December 2021, compared to a 2.8% increase for the twelve months ended December 2020. The employer cost for benefits has also increased over the same time period, increasing by 2.9% in 2021 and 2.1% in December 2020. Of course, this is just an average, which is a helpful starting point, but specific facts and circumstances must also be taken into account.
As organizations continue to combat the Great Resignation, here are some suggestions to best navigate current labor conditions:
Know the Market and Make Informed Decisions
Ignorance is not bliss in this instance. Compensation studies can help to inform a comprehensive human resources strategy.
Here’s an example to illustrate—I worked recently with an executive who was concerned about losing key employees and wanted to adjust compensation so that his key employees were paid competitively relative to any job offers they might receive. We provided him with market data on base salary and annual cash incentive compensation for each key position, which is typical data that we provide for compensation analyses. We also tailored the engagement to provide the value of long-term equity incentives and multi-year cash plans, since a large public company would be a competitor for this company’s key talent and would likely include these compensation elements in job offers. Based on this study, the client was able to determine which key employees were underpaid relative to the market.
Our Schneider Downs Retirement Solutions Team then helped to develop a long-term incentive compensation plan that would encourage retention and align the key employees’ goals with the long-term goals of the company. By being proactive in understanding current market conditions and using this information to inform compensation practices, including the consideration of other elements of compensation beyond salary, this company is in a better position to attract, retain and motivate its employees, which is a win-win for all involved.
Develop a Comprehensive Hybrid/Remote Work Policy
When remote work became the norm for many jobs at the start of the Covid-19 pandemic, the general expectation was that productivity would diminish. Instead, productivity has improved due to fewer meetings and in-office interruptions, the reduction of commuting/travel time and the ability to work when and where it makes sense for each individual.
As workers begin to come back into the office, successful executives will recognize that talented people have come to value and expect this flexibility and may be willing to move on if that autonomy is significantly reduced, a fact that is supported by the Great Resignation. In fact, workers who left the workforce and recently returned cite workplace flexibility as the number one reason for returning.
Of course, as part of this new vision of work, companies must communicate the importance of key activities which do require a certain amount of in-person interaction: activities such as staff training, mentoring and networking, which are crucial to building relationships both internally and externally and are vital to the company’s and the employees’ continued success.
Policies will also need to be updated to communicate which positions are eligible for hybrid or remote work and how workers will be compensated. Successful companies are innovative companies, and those that best adjust to this new vision of work and create strong cultures that empower their people will best weather the Great Resignation.
Communication is Key
Many employees have faced prolonged stress due to disruptions caused by the pandemic and uncertainty in the workplace and their personal lives. As Covid-19 protocols are dialed back, employees are facing renewed uncertainty and stress as the post-pandemic modes of work continue to be fine-tuned. Company leaders who provide regular and effective updates and consider employee feedback will be in the best position to retain workers.
Consider adding or beefing up employee referral programs, contracting with staffing firms or streamlining your recruitment and interview processes to target worthwhile candidates and make job offers more quickly.
In conclusion, companies that have best learned how to adapt during the Covid-19 pandemic will continue to evolve to navigate current challenges, including the talent shortage. Although salary and wage pressures are expected to continue in 2022, other items should also be considered in a total compensation package, including variable compensation tied to individual performance metrics, flexible and remote work arrangements and other perks that provide the work/life balance that workers value.
If you would like to discuss current market trends in compensation, please contact Jen Doering (412-697-5275) for more information about our compensation consulting services.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.