As we enter the final months of 2021, employers everywhere are budgeting for employee pay in the coming year. This is nothing new, but the landscape for compensation planning has changed drastically, due to the impact of the pandemic on the workforce. Though employment levels have rebounded somewhat since the early months of the pandemic, they’re still at the lowest they’ve been since the 1970s, particularly in arenas with the lowest paying jobs. There’s no single cause for the current labor shortage – it’s a complex and multi-faceted issue; and with falling birth rates, economists had forecast such shortages well prior to the pandemic. Now they say that the situation could last for years, or even forever.
The shortage of labor in so many sectors has led to widespread struggles in finding and retaining talent. Jobs for those with fewer required skills and less prior experience – which traditionally paid under $15/hour – are among the most impacted by what is now commonly known as the “Great Resignation.” Exacerbating the situation for smaller employers is the recent trend among larger employers, such as Amazon, Walmart, and Costco, towards hikes to starting pay to over $15/hour. When the big players are making such dramatic changes to traditionally accepted pay practices, and they have so many jobs in the marketplace, this puts upward pressure on all wages in this sector, which presents a significant challenge for small, local employers who feel restricted in their ability to raise hourly wages.
An increasing number of employees are leaving their jobs – or refusing to consider those jobs as acceptable – because they are aware of the upward trend in pay. Employer organizations must anticipate that hourly pay of $11-13 may no longer cut it for workers who have re-evaluated their lives and their goals for the future within the framework of the pandemic and want a better quality of life. Even organizations that are considered best in their class, or a step above their competitors, no longer have an edge when they can’t get people in the door because of pay.
Obviously, nonprofits and smaller businesses can’t simply start raising pay based on demand; they must do so strategically, to ensure that they’re able to support business operations. So how can employers position themselves to maximize value and results in an environment that’s unlikely to change anytime soon?
First, it’s important to consider other approaches not tied directly to hourly pay:
Offering a one-time signing bonus to prospective employees is an appealing option for employers because there’s no long-term commitment to a payroll expense that a smaller business or a non-profit may not be able to sustain in the long term.
An effective employee onboarding process not only provides essential knowledge and resources to a new employee; perhaps more importantly, it instills a sense of belonging, or engagement. Engaged employees are happier employees that have a sense of purpose, and they are more likely to stay longer with an employer. Employers may even need to consider “re-onboarding” both existing employees and new hires, particularly those who have never worked on-site, to foster reintegration and rebuild teams in the wake of the pandemic.
Employee training and development opportunities: when employers invest in opportunities for employee growth, workplace morale increases along with employee retention. Organizations that offer training and development opportunities also build a stronger employer brand and attract better candidates. Employers with limited resources don’t have to invest a lot of money or reinvent the wheel; job-shadowing, mentorships, and cross-training are all great options. OMNI also offers a wide range of professional development workshops at no cost to employees of its Membership and Outsourcing clients.
Flexible work arrangements: Even before the pandemic, this issue profoundly impacted job satisfaction. Now that employees have seen the possibilities for working in a COVID environment, flexibility in scheduling and location has become even more important to workers. Granting employees more control over when and where they work reduces burnout, increasing their commitment, job satisfaction, and productivity.
Organizational culture: The value of organizational culture cannot be overstated; employees that feel cared for and supported by their managers, and who are able to develop positive relationships in the workplace, are more likely to value their jobs in non-monetary ways. It costs very little for an employer to articulate and live its values, yet how people perceive a company and feel about working there is fundamental to employee retention and hiring. On their own, passion for an organization’s mission and good pay aren’t enough to convince an employee to stay in a negative culture. Organizations that are unable to articulate their values both within and in the public arena will not be competitive in a post-COVID environment.
When considering pay increases, small businesses and nonprofits have several options. One approach, particularly if an organization needs to cap aggregate pay increases at 3%, might be to target more aggressive increases for certain employees without whom operations would fail, while keeping increases lower for other types of employees. Some employers may need to consider aggregate pay increases of more than 3% in order to retain vital workers.
It goes without saying, though, that employers who are frugal, agile, compassionate, and willing to think outside the box are more likely to experience greater success in meeting the challenges of attracting and retaining workers in the current environment.
Jon Binder, Senior Consultant and Compensation Practice Leader at OMNI Human Resource Management, has over 25 years of human resources experience, including more than 15 years of compensation design and consulting experience. Prior to joining OMNI, Jon enjoyed a successful career in finance and as a human resources executive with Sprint.