Is Hiring Getting More Expensive?
Between the pandemic and the Great Resignation – 4.2 million Americans voluntarily left their jobs in October 2021 – the recruiting and hiring landscape has shifted. Working remotely and having flexible schedule options are now at the forefront of many candidate requests. With labor shortages and high turnover, the tight labor market has made it a candidate’s job market, opening the door for negotiations that benefit the job seeker. There are some 11.4M job openings in the U.S. today, up 30% from the same time last year.
Cost of Hiring Is Increasing Across the Board
According to The Conference Board, companies are expected to increase salaries by an average of 4% in 2022, the highest bump since 2008. The top two reasons cited for the bump were the higher wages of the new hires coming in – organizations have to adjust current employees’ salaries to align with the new hires’ salaries – and the inflation rate.
Inflation is at an all-time high of 7%. When an employee’s salary doesn’t keep up with inflation, it means less money in their wallet. With an inflation rate of over 7%, the average cost of living increases ranging from 2% to 3% in past years pre-pandemic isn’t going to cut it for current employees and potential new hires to stay and accept offers, respectively.
Candidates have bargaining power in a candidate’s labor market, and they know it. Candidates aren’t afraid to ask for what they want. They’re seeking more pay, feel empowered, and are eager to look around at the opportunities available to them.
In recent months, average candidates were receiving signing bonuses and imaginative benefits just to get them on board, so businesses had enough staff to operate. Experts suggest that the labor shortage will continue, and candidates can expect higher salaries in several industries. Labor shortages have caused an increase in wages in higher-paying fields throughout the past year, and that trend is expected to trickle down. Higher salaries in lower-tier fields and positions are likely.
According to the Labor Department, wages rose at over 4.2% and jumped by 1.5% in 3Q 2021, the highest jump ever recorded. Workers in bars, hotels, and restaurants saw an average pay increase of 8.1% compared to the same time the year before, and it jumped 5.9% for retail workers.
Factors That Impact Hiring Costs
The cost of hiring an employee includes salary and training resources, benefits, recruiting, onboarding, and more. Consider these insights reported by Investopedia:
- Smaller companies spent $1,500 on training per employee in 2019.
- According to a Boston Business Journal columnist and senior lecturer at MIT’s Sloan School of Management, benefits cost between the 1.25- and 1.4-times base salary range.
- Recruiting costs involve job advertising, time spent by recruiters and interviewers, pre-employment assessments, background checks, and drug screens, all of which add up.
- Per a survey of 210 CEOs by the Harvard Business School, it can take up to six months for an organization to break even on a single hiring investment.
Add the compounded effects of the pandemic, and hiring costs have spiked even more.
What Can Employers Do to Attract and Retain Employees?
Focus on DEI and Employee Experience
Employee experience is essential. Experts report that employees want to work for employers that focus on diversity, equity, and inclusion (DEI) and offer collaboration, training and development, and a healthy culture. A sense of belonging and fulfillment can go a long way in recruitment and retention efforts.
Highlight Entire Compensation and Benefits Value
When discussing compensation and benefits, be sure to emphasize all benefits and perks you offer, as well as the total value, including salary.
Offer Plenty of Time-Off and Flexible Work Arrangements
Employees seek flexibility and time off in today’s world, so where possible, offer flexible schedules, remote work, and ample paid time off for a competitive advantage. Other desired benefits include telemedicine services and leave to care for children or an adult family member.
Speed up the Hiring Process.
In a tight labor market, speed in the hiring process can be a competitive advantage. The faster you present an offer to a candidate, the more likely they will have your offer in hand before, or at least in line with, others.
Until the cost of hiring plateaus and decreases, employers can put their heads together and come up with creative ways to attract and retain top talent. Company culture and reciprocity can go a long way in meeting the needs of candidates and employees.