Salaries are back on the table (actually they never left) - how to recruit successfully in 2022
As the cost of living soars - employees need inflation busting salary rises
The costs of living are about to go up significantly - it’s no surprise or secret. So it should be no surprise that if a candidate is looking to move roles, a large motivating factor is in fact salary. As lovely as the additional benefits are, such as unlimited holiday, free fruit or a pool table and lunchtime yoga, they aren’t going to be paying the candidate’s bills. Candidates won’t be interested in moving for less money (or even the same salary) and even less so in the current competitive job market. External inflationary pressures and other impacts to the real wage mean that for now, salary does matter more to candidates.
Real wages are about to nosedive further in 2022
With inflation already at over 5.5% and additional pressures from a 23% increase in electricity prices, 24% increase in petrol/diesel prices, real wages are falling at pace. As the new financial year rolls around, the reality is that the majority of employees are likely to be worse off than they were last year and they will have less disposable income to spend. Depending on when your employees last received their pay review, they could already be many thousands worse off due to high prices. Unless businesses move to offer wage increases that are inflationary busting which will require a minimum of 5.5% to be on a par with current inflation measures and significantly more as the energy price caps are removed on 1st April. It is unlikely that businesses are going to be able to create a situation where wages rise by enough to cover all of the inflationary pressures alongside the impending rise in National Insurance.
Wage - Price inflationary cycle in 2022
The challenge with increasing salaries is that someone has to pay for them and usually that will be the consumer, in the form of higher prices. The more pressure there is for salaries to go up, the more pressure there will be on prices to rise, and we become stuck in a wage - price cycle. With the reduction in strength of the unions, there is less pressure on businesses to put up their wages as high as inflationary pressure. There are also some factors which are driving inflation that are hoped to be short term - namely energy and fuel which may lead businesses to justify their less than inflation wage rises. As we have seen to date, wages have yet to catch up with the inflationary spikes that we have seen over the last 12 months, but with the recent great resignation, employers may opt to boost salaries in a bid to keep employees on side and to remove the temptation to move elsewhere. Wage price cycles are bad news as they continue to push up inflation and even more unsettling are the measures used to break them, which generally result in a forced recession and resultant job losses.
Money will get their attention, flexibility and remote working will secure them
If as an employee, you’ve only just been making ends meet, or you’re one of those employees who works for an employer that increases salaries by less than 3%, now you might be ready to move jobs. No matter how good the business is that you work for, or the job that you do, you still need to be able to cover your bills. Given the recent inflationary pressures and the impending cost rises, we think that there will be an increase in the number of candidates applying for roles.
Recruitment has been challenging for some businesses of late, particularly due to the speed at which candidates have been recruited, as well as the ability to offer the right benefits / salary mix to attract talent. Flexible benefits and unlimited holidays are ‘nice to have’ but they simply aren’t going to pay the bills. Talented candidates are focussed on making their next career move work for them on all levels and money has moved back up the list of priorities. Therefore at times like these, you need to be a step ahead of your competition and carry out some work to find out what the benchmark salary is.
Working from home is a huge benefit
Flexible and fully remote working is still really attractive to prospective candidates and sits up there with other well being measures. As costs of travel continue to rise, candidates see working from home as the holy grail, so if you want to stand out in a crowded market, this is one way to achieve it. Many businesses have reverted to a few days a week in the office but that doesn’t mean it costs any less for candidates to travel in over 2 days v 5 days, thanks to the way that train tickets are priced these days.
Consider the offer of a golden handshake
If you are unable to compete fully with larger businesses on salaries, perhaps you could offer your new joiners a golden handshake, which they receive after working with you for a period of time. This can help move your cash flow out by a period and it can operate like an extra bonus that they receive in the year, say after their probationary period, such as 3 or 6 months.
Partner with an experienced recruiter
Any experienced recruiter will have their finger on the pulse when it comes to salaries. A great recruiter will have a network of professionals that they have worked with and will be able to canvas and be able to carry out some salary benchmarking for you. This will give you an idea of what the going rate for salaries is within your direct competitors but also across the sector. If you are a start up looking for ways that you can stand out against the bigger competitors, talk to us. We work with all sizes of companies and have experience supporting start ups to attract the best talent suited to open positions. We are able to advise on ways to successfully recruit talent. Find out more here.