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The talent war is raging, and CEOs want their human resource heads (CHROs) to spend more time finding, retaining, and upskilling great employees. That is according to a recent poll by Chief Executive and the Society for Human Resource Management (SHRM).

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Many companies are gearing up for significant growth as the pandemic eases, but the speed of the economic recovery has unleashed a talent shortage. Few organizations have all the talent they currently need. Further, poaching may rob companies of talent needed to grow. In fact, the more successful a company is, the more likely it is to become a recruiting target.

To acquire and retain talent, organizations must be preemptive by developing a competitive and fair compensation program. Worker shortages, the improving economy, and inflation are putting increased pressure on wages and salaries. Making sure compensation comparisons are up to date is essential (and more challenging). Survey data may be less reliable in this rapidly growing economy. To update the comparison, we also recommend getting a pulse on the market through colleagues as we continually assess through out contacts.

With an equitable compensation plan as a starting point, HR teams hiring and retention initiatives will go further.

HIRING TOP TALENT

The U.S. Labor Department reported more than 7.5 million unfilled job openings in June 2021, a slight improvement over March of this year. Nonetheless, employers continue to struggle with hiring and finding employees whose skills match their hiring needs. To close the gap, we advise organizations to:

1) Shift the hiring focus from a work history to a skills or competency-based approach. This will open a new pool of potential workers and demonstrate that there is no best route to a role. For example, significant numbers of food service employees have lost their jobs. Many have the skills to be successful in customer service roles, currently a high-demand function.

Refocusing on skills will mean recasting job descriptions to skills needed versus work history requirements. Managers will need to change their mindsets and expand training programs to prepare employees for new roles. And an adapted evaluation process may be needed as the newly hired learn on the job.

2) Do not overlook internal candidates. Emphasis on skills is the future of training and development. Companies are realizing the need to reskill or upskill their employees. Exposing employees to different areas of the company will help to identify business areas that they are interested in. Start by including them in cross-functional teams and meetings. Most important, encourage employees to keep to a continuous learning cycle.

3) Get creative to recruit women back to the workforce. In March of this year, almost 1.5 million fewer mothers of school age children were working compared to February 2020. As schools return to in-person instruction, more women will be available to fill recruiting needs.

However, some creativity is required. Consider flexibility to address childcare responsibilities, work-from-home arrangements, access to EAP or mental health programs, and reintegration training for women who have been off long-term.

RETAINING KEY EMPLOYEES

Surveys show that anywhere from a quarter to more than half of employees are planning to look for a new job post-pandemic. To avoid losing key employees, companies need to offer competitive compensation. After all, these employees are among your most valuable assets. Losing them is expensive and replacing them may not be possible.

Photo courtesy of Pixabay

There are three employee groups that bear special consideration: top performers, those in positions of high demand, and high-potential employees. About 10% to 15% of salaried employees are top performers. Look at employees that performed consistently for at least two years; last year can be considered an anomaly.

High-demand positions are those that came into prominence last year. An example is supply chain workers dealing with product shortages, shipping delays and general vendor delivery uncertainty. These jobs are netting higher wages and salaries as demand outpaces supply. Employers may have no choice but to invest more heavily in these positions.

The final group is high-potential employees who have been identified to receive special developmental opportunities. These are your future leaders. Continue to invest in cross-functional training and educational experiences.

SUMMARY

Moving forward, businesses relying on a pre-pandemic pay equity analysis must adjust to changing market conditions. Some will be forced to wait until profits return to fund pay equity adjustments. A thoughtful analysis will help companies get from here to there.

HR hiring and retention programs will be challenged for months to come. However, there are compensation planning steps employers can take now to improve program outcomes and make the most of the current job market.

LET’S CONNECT

To discuss how to recruit and retain key employees, please contact Neil Lappley at (847) 921-2812 or nlappley@lappley.com.

How will your organization meet employee demands in a post-pandemic economy? Despite an expanding jobs market and growing optimism about the recovery, employers are finding that in many ways employees are in the driver’s seat as competition for workers tightens. This seeming paradox comes as unemployment levels remain high.

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Agile companies are responding with compensation and benefits programs that address employees’ shifting priorities. Yes, making a fair and competitive wage or salary is important. But so is workplace flexibility and a focus on employee health, wealth, and well-being.

Here are four of the most relevant post-pandemic workforce challenges and opportunities to consider when revising your compensation plan in 2021:

1) Hiring & Retaining Key Employees

The biggest human resource challenge facing companies as the economy recovers is hiring and retaining employees. In the latest jobs report for March 2021, openings in the U.S. rose to 8.123 million, the highest on record. This is 5 million above pre-pandemic levels, based on data tracked by the Bureau of Labor Statistics.

While many of these job opportunities are in industries virtually shut down during the pandemic, other sectors including manufacturing are expanding. Unlike prior recessions, the laws of supply and demand are not the only trends impacting hiring and employee turnover. Concerns about workplace safety, issues with childcare, and other factors such as generous unemployment benefits may be keeping some workers on the sidelines.

Still, paying a competitive salary is key to bringing on new talent and rewarding key employees, especially your top performers and those in positions in high demand.

Finding real-time wage and salary information will help you determine how competitive your current compensation plan is and whether adjustments should be made.

2) Targeting Pay Equity

Organizations are targeting pay equity to ensure employees doing similar work under similar working conditions are paid fairly. Employees are demanding it; laws require it; and employers must address it to recruit and retain top talent.

Photo courtesy of Pixabay

The current federal administration will likely apply more stringent enforcement of equal pay regulations. Already employers who run afoul of the Equal Pay Act (EPA) can face penalties from the Equal Employment Opportunity Commission (EEOC). However, the reputation damage can be much worse, affecting the ability to attract and retain talent.

3) Enhancing Benefit Programs

As workers’ needs evolved during the pandemic, the value of benefits to all employees has become increasingly apparent.

Flexible work arrangements have been evolving and have been accelerated during the pandemic as employees had to care for children being schooled at home or for other family members. Accommodating flexible employment arrangements has become central to being an employer of choice. This means working outside of the historic 8 am to 5 pm workday and balancing employer and employee needs.

Some employees are subsidizing childcare, recognizing that difficulties finding reliable care during working hours may affect productivity. Others provide care on-site.

In any case, taking a fresh look at benefit strategies goes together with pay to support a competitive total compensation package.

4) Compensating Remote Work

During the pandemic, most organizations implemented employee work-from-home programs. Many employees would prefer to continue working remotely, at least part of the time. In exchange for reduced commuting time and more flexibility, many found these new arrangements to be more productive and family friendly.

Employers also found remote work arrangements helped them save on real estate and other overhead, such as travel and meeting expenses. Making these types of arrangements permanent or long-term will require changes to management style to integrate remote and in-office workers.

In addition, companies who can hire from any location must decide how they will pay their remote workforce. On the one hand this is a desirable workplace perk, while on the other salaries vary drastically depending on competitive practice cost of living and other factors from region to region.

We believe that most companies will approach the issue by referencing cost of labor and not cost of living data. Whether they use specific location or broad geographic information to determine a compensation structure has yet to be determined. But companies will most likely base remote compensation on competitive practice to avoid paying under market and allowing employees to be poached away because of pay.

Summary

Shifting attitudes about work and the workplace developed during the pandemic will carry over longer term and will impact compensation, hiring and retention in 2021 and beyond. What you pay employees and how you reward them with benefits and services will either help or hinder employee management plans in an increasingly competitive job market. Be sure to make the right choices based on what’s competitive for your industry and market.

Contact Us

For help or information on this topic, you can email me nlappley@lappley.com or call (847) 921-2812.

Sometimes great advice comes from our peers and respected colleagues. This is why networking, panel discussions and webinars are such powerful business education tools.

With that in mind, this issue of Compensation Alert shares expert insights from a diverse group of human resource (HR), management consulting, compensation and employee retention leaders. We asked them for feedback on three key questions impacting hiring and compensation management decisions in 2020. Our experts include:

  • David Gilmartin, managing director at Patina Solutions, a management consulting firm that partners with organizations to fill a key expertise or resource gap.
  • Jeff Kortes, an employee retention consultant, author and speaker. Jeff is founder of Human Asset Management.
  • Aaron Schneider, managing director of the Petenwell Group, an executive search and employee retention firm.
  • Rena Somersan, president of the Milwaukee Area Compensation Association (MACA). Rena also is the Newport Group’s managing principal, compensation consulting services.

Of course, HR compensation consultant Neil Lappley, founder of Lappley & Associates and publisher of this newsletter, also weighs in.

Here are Your Three Questions and Answers From our Top Experts:

1) What do you think will happen with wages, salaries and benefits this year?

Salaries will continue to increase; part of that is driven by what everyone is calling the “labor shortage.” Benefits will remain the same. Aaron Schneider

Wages and benefits will (increase) at a higher rate; lowest-worker wages will finally start to push the next tier of worker wages up. Middle-level managers will see wages go up at a rate lower than the lowest tier because (they) tend not to leave and (so) are subject to the “salary pool budget.” Jeff Kortes

Photo courtesy Pixabay

Wages will remain flat this year. With the state (of Wisconsin) not making changes to minimum wage, that alleviates the short-term risk.

Still, (there is) concern changes (will be) made for 2021 and beyond or at the federal level. David Gilmartin

Our market intelligence suggests that 2020 wage growth for production, professional (non-management), management, and executive job classifications will remain largely unchanged from the prior year, hovering between 2.8% and 2.9%. While we do not anticipate sweeping changes in benefit plan offerings for 2020, employers are modifying their benefit plans to entice younger workers. (Offerings include) tuition forgiveness, flexible schedules, and richer parental leaves of absence. Rena Somersan

Median salary increases will be flat at median 3.0% and average at 3.2%. Assuming the Consumer Price Index increases by 2.3% as projected by the International Monetary Fund, real salary increases will be .7%, the lowest level in 40 years. Neil Lappley

2) What are the biggest HR challenges facing your clients? What have you been hearing from them?

Recruiting and retention (are) the biggest challenge(s) and will be for the next decade at least. My manufacturing clients are still afraid to raise prices, but when they have gotten past that they have been making (prices) stick by telling clients they (can’t) keep talent if they are not competitive with compensation. When the argument is presented in this way, customers accept the increases. Jeff Kortes

No question the two biggest challenges facing management are retention and recruiting. Companies are expanding their sources for new workers and are paying more attention to taking care of current employees. For HR and compensation professionals, emphasis is being placed on pay equity and pay transparency. Neil Lappley

Photo courtesy Pixabay

Employee retention and hiring are my clients’ biggest challenges. The availability of skilled laborers is a significant risk in Wisconsin and beyond, especially with our strong manufacturing base. There is also concern for finding leadership and technology skilled resources. One example: Milwaukee Tool needs to find almost 800 (new) employees as they continue to expand in SE Wisconsin. David Gilmartin

Our clients and members of MACA are concerned about executive talent flight. The job market is hot for skilled executives who possess the managerial fortitude to lead organizations through major transformations in today’s increasingly competitive global economy. Rena Somersan

The pressure is on to review systems and processes. Many HR managers are under increased pressure to increase benefits, find candidates for job openings, and (improve) employee engagement. These managers are noticing that some of the same systems that worked for the last several years are changing. Aaron Schneider

3) What would you advise your clients – especially small and mid-sized businesses – who are having trouble hiring and retaining top talent in the current business climate?

As companies struggle to differentiate rewards and recognize excellent employee performance, they are increasingly turning to incentive compensation, both in number of programs and numbers of eligible participants. At the same time, employers are relying on gig workers to fill employment gaps in the tight labor market.

In addition, to capture and retain talent, employers are personalizing employee benefits – not necessarily high-cost perks – that align with their culture, offer greater flexibility and work-life balance. Neil Lappley

My advice it to take advantage of firms like (ours) who (can provide) experienced professionals who are willing to work in interim and project-based roles with clients. Businesses need to look beyond the Wisconsin state border; (Patina Solutions) has access to those resources and the ability to expedite the hiring process for our clients. David Gilmartin

Increasingly, executives at SMBs are being hired by larger companies. These larger companies likely have long-term incentive (LTI) programs in place to attract, retain, and reward executives for their contributions to the business. LTI programs provide actual or pseudo “ownership” in the firm and typically comprise a large portion of the executive’s total direct compensation package.

Photo courtesy Pixabay

To maintain a competitive edge, SMBs should determine whether their executive compensation programs provide a long-term incentive opportunity for key executives. The LTI opportunity should be aligned with the company’s strategic plan and future growth goals, and it should provide monetary rewards commensurate with performance and appropriate levels of risk taking. Even if SMBs cannot provide “ownership” in the traditional sense (i.e., equity), several cash-based program types might be considered. Rena Somersan

Hire where you are at. Meaning, in small and mid-sized organizations, it is important to hire people that fit your current organization, but maybe can take you where you’re going. (This also means not hiring) someone outside of your current capabilities. If you are focused on the ideal candidate and not getting jobs filled, shift to hiring candidates that fit the culture and be ready to train them up on the needed skills. Aaron Schneider

Focus on retention. In my case, I tell them to pay competitively and “Give their Employees C.R.A.P.”  (Caring, Respect, Appreciation, and Praise). Develop a strategy to retain people (versus) trying to recruit people. Jeff Kortes

Do you have more questions about where wages, compensation and benefits are heading in the current economic climate? Or would you like to connect with any of our Q&A contributors? If so, please contact Neil Lappley at (847) 921-2812 or nlappley@lappley.com.