Hiring in Today’s Challenging Job Market

Hiring a new employee used to be easy, right? There were good candidates for each role and it was an employer’s market. For anyone who hasn’t hired anyone recently, here’s a newsflash – those days are long gone now! Today, the market is an employee’s market, with fewer qualified employees to choose from and those interested in your role are looking for top pay to join your company.
We see this issue all the time when working with our clients. The average salary for a position internally may be $70,000, while the average salary candidates are looking for might be $85,000. This scenario comes up consistently with the limited candidate pool and the demand for top pay is a constant out there now. The truth is this trend will probably not stop anytime soon. The labor market continues to contract and the employees are in the driver’s seat in many cases.
What do you do when this occurs? Your initial reaction is to pay what the candidate is looking for and hope that your current employees don’t find out. It sounds like a good idea, but could backfire with a major ripple effect from irate employees. As we have discussed before, it is extremely important to know your employee population well. Who are the top performing 10-15% of your employee base? Know who they are and pay them very competitively at the top 75% of the market or above. If you have employee turnover, you don’t want it to occur with your top talent as that has a big impact on your company today and in the future. In addition to very competitive pay for your top performers, make sure you keep them challenged and show them meaningful career development opportunities.
Now that we have covered top performers, let’s talk about good performers. Pay your good performers well. This group may lag behind the market now, especially in the last few years when market pay for new employees has far exceeded internal pay. The demand for new hires has far exceeded the supply of talent. As a general practice, we recommend that you externally benchmark compensation for your positions at least every 2 years. By understanding what external pay looks like for your positions, you can be strategic around compensation vs. being reactionary.
Here are a few tips on how to handle this current market where new hires are demanding a much higher salary than you pay internally to your existing employees:

Sign on Bonus. You can try offering a sign on bonus to the candidate vs. offering them the full base pay they are wanting. This may not work all the time, but they may consider taking a slightly lower offer if the sign on bonus is attractive.

Higher than average pay increase at first review. You can put in their written offer that if their performance is good when employee reviews are completed, you will give them a set pay increase amount higher than your average pay increase. By doing this, you can also begin to address the internal pay issues to narrow the gap between higher paid new employees.

The last thing that companies can occasionally do is a one-time market adjustment on pay. This solution can be expensive and will not be possible for every company. However, some companies can afford to do this depending on their profitability and the number of employees in the roles where the market adjustment is being made. This one-time adjustment can make up for years of poor planning in some cases.

The bottom line is that your employees are your most valuable and costly asset. Being strategic with your employee compensation allows you to keep up with external market pay, keep your top performing employees, lower overall turnover and grow your company. Those companies without a compensation plan run the risk of falling behind market pay which makes it harder to recover later and having employee turnover issues along the way.
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Small and medium-sized businesses may not have the time or expertise to implement the necessary people strategies for business success. The ideas above can be easily implemented by you to help improve the performance of your employees which leads to increased employee engagement and increasing the bottom line.

We are here to help you with the people side of your business: employee engagement, retention programs, performance management, vision, and strategic plans, leadership development, selection & onboarding, compensations programs, organizational design, employee handbooks, core values, and all things HR-related.