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The headlines about a tight labor market are not fluff. With US and Canadian unemployment at 3.6% and 5.2%, respectively, finding and keeping the right employees is a constant battle. What makes this even more difficult is that employees are reading the headlines too — they’re fully aware that they are in the driver’s seat. Of course, HR is well aware. Mercer's Global Talent Trends report revealed that 70% of HR respondents predict higher than average employee attrition this year.
Quality employees hold power right now — they know you need them and are evaluating their options. They may already have multiple job offers from competitors; however, many employees would prefer to stay in their current company. They are just looking for a change, whether that is a new opportunity or a raise. According to a 2021 Gartner survey, 33% of candidates who sought a new job in the previous 12 months searched internally within their organization first.
What can you, in HR, be doing to prepare and gain confidence for discussions with a valued employee looking for more? You must know your jobs, your bench strength, and the market. Whether you counteroffer, give them a pay raise, or turn them down depends on your preparedness.
Regardless of labor market cycles, a clear compensation philosophy as the backbone of a competitive compensation strategy is the foundation for all pay discussions. It's quite possible that your compensation philosophy and the corresponding pay management strategies are in need of a refresh. Accurate and timely compensation data and insights are crucial when discussing employee raises, negotiating salary, or deciding to match an external offer.
Across company levels, how competitive is your pay versus the market? Are your current employees paid in alignment with your current compensation strategy? Knowing the answers to these questions can help you proactively identify needed market adjustments or inequities to prevent unhappy employees.
Mercer suggests using current market data every one to two years. While previous merit increases across the board were routine, current pay rates often change inconsistently from year to year. Rapid growth in particular areas and not in others creates too much variation across jobs and industries to add a standard increase indiscriminately. Additionally, the ongoing Great Reshuffle has spiked areas where many employees are now new hires that were often hired at a higher wage, thereby raising the median values.
When employees approach a manager to talk about pay, in most cases, that manager is likely filled with anxiety. Managers frequently find it uncomfortable and lack confidence when explaining how compensation practices are determined and why employee salaries are what they are. (See the first section on market pricing with a clear compensation philosophy.)
In a recent article, Kevin Poff, one of Mercer's consultants in our Career business, shares some tips on pay conversations and how to respond when approached by employees about pay. In summary, the 4 main points he shares are to:
Get clear about which roles are critical to driving success for your organization. Have conversations proactively with your leaders to identify what roles are high priority and what roles are challenging to recruit. These positions are the lynchpins of your organization. They can't be vacant without impacting company success, so you need to have a constant pipeline of candidates and engagement with the current employees.
As an organization, succession planning provides you confidence that when someone does announce they are leaving, you know how you will backfill a role quickly. It may be the difference between counteroffering and wishing the employee well. Additionally, succession planning reduces the amount of “company knowledge” that walks out the door when an employee leaves. Having a plan and knowledge sharing can keep productivity moving.
All employees should know their value in your organization, but these roles merit extra attention. Recognize that your employees in these roles are vital to keeping your organization afloat, so it's essential that they feel confident that leadership is invested in their well-being.
One of your top priorities as an HR professional in today’s labor market is connecting with employees in meaningful ways. That’s really the only way you’ll be able to identify the right actions you can take, offerings you can provide, and programs you can implement that align with your unique employee population.
According to the 2022 Mercer Global Talent Trends report, thriving employees are 2 times more likely to work in organizations that balance economics with empathy. That indicates that when employers consider the whole employee by supporting their well-being and mental health, they create work environments for employees to thrive.
Burnout is a major issue, and employees are struggling with mental health. Mercer’s 2021 Health on Demand research found that while 59% of US employees say they feel some level of stress, one quarter report being highly or extremely stressed. Offering a diverse set of well-being and mental health benefits will help manage several people risks, including employee exhaustion, rising health costs, and employee turnover.
Gaining insight into employee experiences and perspectives is critical to understanding, leveraging, and directing your talent. Conduct an unmet analysis needs or quick pulse surveys to understand better what causes your people stress and how to give them peace of mind.
Employees desire to know how they fit in and what the company has planned for their future. Employees who can see where they fit in a bigger plan are more likely to know their value to an organization. Succession planning also promotes a collaborative team environment – “when my boss does well, we all move up” kind of thinking.
If one in three employees who are unhappy in their current positions are looking internally first, help them stay. Both the company and the employee benefit if you are able to shift an employee to a new role through re-skilling or simple transfers. It also signals to the employee that, as an organization, you care about them — balancing the economics with empathy.
Turnover is costly to your organization from the recruiting, hiring, and training efforts that go into a new employee. There are additional inefficiencies as the new employee learns the cultural and social workings of the organization. The bottom line is that there are productivity losses when you have to replace an employee with an external hire, so it’s worthwhile to keep talent in house.
Take some time to assess this list and see where your company is strong and where you see some opportunities.
Mercer is here to help you prepare for employee discussions.
Contact us at email@example.com or 855-286-5302 today!
How to prepare for employee discussions
- Compare your jobs (pay) to the market regularly
- Prepare managers for pay discussions
- Identify your “hot jobs”
- Understand what's important to your employees
- Define succession plans and skill development
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