When last year started, you likely had a workforce strategy in mind. It might have been highly detailed with strict milestones and KPIs. Or it might have been far more informal. Either way, you expected to do some hiring in certain areas with a ballpark compensation budget. Then came COVID-19. With an economy in turmoil and a labor market turned on its head by the pandemic, should you tear up your 2020 strategy? Is there any value to be salvaged from your original plans? It’s true that these are difficult questions to answer and address. However, that doesn’t mean starting from scratch. Nor does it mean that we can’t look behind us to find a way forward in these unprecedented times. There are certain truisms about salary that you can rely on, regardless of external conditions.
- Salary remains the #1 incentive for recruiting and retaining good talent.
- Knowing your local market and what it demands is critical.
- Unusual conditions call for imaginative thinking.
Compensation Will Always Be King
Despite all the work that has been done by employers in the past decade to provide a supportive corporate culture, growth opportunities, better work/life balance and a wish list of attractive perks and benefits, compensation is still king. It likely always will be. Money remains the most compelling enticement that drives employees to join an organization - and to leave it.
When people lose their jobs through no fault of their own, as is the case in the pandemic, does that change how they feel about pay? Not necessarily. In our Emerging Workforce® Study, which we’ve conducted over more than 22 years, we found that although candidates may accept a salary below their expectations, they will continue to yearn for better, keeping their head on a swivel to ensure they never miss more lucrative opportunities. This is most prevalent among younger workers who are less content to accept that economic conditions may curtail their financial ambitions.
In the years following the Great Recession, pay rates stagnated. Even as the economy improved and the job market expanded, compensation remained a dark spot on a brightening horizon. That was true for the economy and true for the workforce. Experts puzzled over it, although few could explain why salary took so long to perk up. Candidates who felt they had accepted lower-paying positions because they had few options at the time were confident they could demand higher wages as the job market improved. That confidence fueled turnover as economic conditions improved. We may see a similar pattern as we move away from this new pandemic-fueled recession. Candidates may accept lower salaries now if they've been out of work due to the pandemic, but they will be on the lookout for any opportunity to improve their financial standing.
Post-recession research conducted by PayScale found that from 2009 to 2011, the number of organizations concerned about retention rose significantly, from 28% to 47%, underscoring how critical it is to consider compensation in retention efforts. It may not seem important right now, but each time Spherion asked employees to rate retention drivers over the past decade, compensation came out on top, regardless of the economic outlook.
Employers should take heed. With demanding budgets, there may be pressure to undercut pay rates on new hires. Pinching salary is not the wisest way to bolster the bottom line. The monetary benefits may be short-lived, and the potential damage to corporate reputation may linger for years to come. Spending wisely is smart business and something easily done by incorporating a market rate check as SOP for every new hire. (Makes sense for any salary decisions, whether new hire or not.)
To review the latest salary data, request a copy of our latest quarterly salary guide from your nearest Spherion office.
To continue reading more on these three truths, check back frequently.