Companies affected by the Great Resignation of workers are responding with a Great Recalibration of wages. Hourly wages rose 4.8% at the end of 2021 compared with 12 months before, according to the Labor Department. Companies will be shelling out even more in 2022 with pay increases ranging from 3.9% (Conference Board), to 5% (Grant Thornton), to 5.2% (Deloitte).
In the labor market, it is currently a worker’s market, and that is very different from the environment we’ve seen for the past three decades.
When trying to attract and retain employees, companies are walking a fine line between increasing compensation—usually a company’s biggest expense—without slowing profit growth.
Here are five steps you can take to set the most advantageous wages and win the current talent war:
- Track data on wage trends – Carefully monitor shifts in wages, quit rates, unemployment rates, and inflation. Accelerate can help you gather the necessary data to track the latest trends.
- Expand scenario planning – Companies have been subjected to the greatest range and severity of risks in decades. While considering wage increases, track threats to growth and plan for a wide array of outcomes. Be sure to build into your scenario planning rising costs for labor and other expenditures.
- Expand geographical staffing range – According to Deloitte, 88% of companies said they will apply a hybrid work model in 2022. Consider reaching beyond your company’s usual area for employment into regions with lower average salaries.
- Validate higher wages – Wage increases don’t have to erode profitability if they’re accompanied by productivity increases. Technology can boost productivity and validate an increase in wages. According to Deloitte, 92% of companies plan to reduce labor costs in 2022 by increasing their use of automation.
- Broaden compensation definition – Companies should take several steps to improve the employee experience, including offering flexible or hybrid work arrangements, launching learning and development programs, providing top quality technology as standard issue, and ensuring a “well-bring atmosphere.” Offering employees additional benefits can cost less than the expense of hiring and training employees to fill vacated spots.
Source: CFO Dive