One of the more remarkable features of the tight labor market is the relatively meager wage growth; companies are scrambling to hire and retain the talent they need, yet overall pay raises have barely budged past 3 percent for the past several years.
The slow wage growth is confounding, given the state of the market, according to Jim Link, chief human resources officer at Randstad North America. Even so, any raise is a positive development, he told Bloomberg Law.
"It’s a little hangover from the recession; companies want to make smart decisions. Slow and effective wins the race. We continue to focus on what’s really important to employees, because the employees are starting to get restless," Link said.
Organizations increasingly realize their talent is susceptible to getting picked off by competitors and are adjusting their total rewards, he added.
"We’re seeing employers react in different ways to the market. They aren’t just giving out increases in base pay, but essentially getting smarter about how they handle pay packages," Link said.
This means a move toward more spot bonuses, equity adjustments, and other supplemental pay in addition to the usual base pay increases, according to research from Randstad.
Do Bonuses Cut It?
As the employment scene changes, companies are struggling to adapt, according to Lydia Frank, vice president of content strategy at PayScale.
More than half of companies surveyed by PayScale said they were concerned about retention, yet most plan on raises below 3 percent—barely above the inflation rate.
"We see a lot more people talking about variable pay as a potential retention strategy. There are all types of bonuses being used. They know it’s part of their total compensation philosophy," Frank told Bloomberg Law.
While variable pay is appealing, it can’t replace keeping base pay ahead of the rate of inflation, according to Frank. "If they don’t feel like they’re secure, with their salaries keeping up with inflation, they will start to question whether your organization is serious and if they are getting the value back for their time with the company," Frank said.
If organizations don’t keep compensation at competitive levels, they risk losing their employees, she said.
Things have shifted a lot in the workforce over the last half century in the relationship between employer and employee, according to Frank. Employees no longer feel they need to spend a lifetime with the same organization, so companies have to consider what will retain their high performing employees, she added.
"It’s something for companies to think about, if retention really matters to them. Spot bonuses aren’t necessarily going to cut it. It’s one of those things where the kind of feeling it creates fades quickly. It has a short half-life. The bonus is less cost for the company, but is less impactful for the employee," Frank said.
Wage Levels Matter
Some positions may be difficult to fill because too few people have the right skills, but there are also jobs with pay levels that aren’t high enough to attract candidates, according to Kyle Kensing, online content editor at CareerCast.
Tough-to-fill jobs span a wide range of salaries and titles, according to a survey from CareerCast. Application software developers are number one on the list, with expected job growth of 31 percent through 2026 and a median annual salary of $100,080.
But the position with the greatest projected growth is home health aide, and that job has a median annual salary of $22,600, the CareerCast survey found. The need for personal care aides is also growing rapidly as the population ages, and low wage levels are part of the reason it’s so difficult to fill these positions, Kensing told Bloomberg Law.
"They are gateway positions to other jobs in health care. Long term care aides do require some schooling. Organizations could continue the education for a home health care aide so they could progress into another position, such as a nurse," Kensing said.
Create an Appealing Package
Considerations such as future career opportunities factor into employees’ thinking when they weigh their job options, according to Link. While salaries are always important, employees also consider career growth, flexibility, schedules, paid time off, and volunteer opportunities, he said.
"Companies are spending more time re-engaging employees in the employee experience. That experience begins when they first notice the company and continues all the way through until they leave that organization," Link said.
Providing the opportunity for learning and career development can be very appealing to employees and boost both engagement and retention, Link said. Ultimately, a company needs to align its pay, benefits, and other offerings to attract the right talent, and then provide employees with the kind of experience that will help the organization retain the talent it has, he added.
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