What Employers/ Hiring Managers Should Keep in Mind When Deciding Pay for A New Hire
The cost-of-living crisis is no surprise to most, with the fastest increase in prices since November 1981. “The hottest inflation in forty years is taking its toll on families, with three-quarters of middle-income Americans saying their earnings aren’t enough to pay for their cost of living,” according to CBS News. A survey conducted by Mercer, a human resources consulting firm, found that 45% of more than 300 surveyed companies do not factor inflation into salary budgets. The survey also found that about 50% of organizations say they are conducting salary reviews due to the challenges of finding and keeping employees. So, hiring managers, what does this all mean, and what necessary actions should be taken from here?
The overall strength of the market is that there are more job openings than seeking workers, making job seekers much more selective. Hence, many companies are increasingly offering more money to seekers to lure them in. “There’s a saturation point—you can’t compete based entirely on wages. But we’re at the point right now of people saying, ‘I will not work for you unless you can pay me more money.’ So there’s this stair-stepping process going on, where everybody’s raising their wages a tiny bit at a time.”
Although, there are still companies that are firm in their offer of salary, not quite meeting market and competition, and those companies may be finding it hard to fill job openings. In most cases, candidates are looking for a 20% increase in total pay to even consider leaving their current employer. Are there exceptions to this where candidates are willing to make lateral moves? Of course. A larger, more prestigious company recruits them, they receive much better benefits or work/life balance, or they have more opportunities for career advancement. However, in most cases, it makes no sense to leave your current employer for another job making the same money. You’re sacrificing job tenure and built seniority, as well as the comfortability of a role and company where you’re established. Ask yourself as a hiring manager: would I make a lateral move for no additional monetary compensation?
Like it or not, inflation is very real right now and you must combine that with the normal year-over-year compensation incremental increases. Here is an illustration, albeit an extreme one: every year in the NFL, the most talented free agent quarterback sets the NFL record for highest contract, or average annual salary. But guess what? 3-4 years later, that record-breaking deal the QB got, is now 5th or 6th on the list of highest average annual salaries. It’s the same in the CRE industry. What you pay a Financial Analyst or a Development Manager or a VP of Acquisitions today will be lower than what you pay them in 2-3 years. What’s the point? Go get yourself the best talent now by paying market, and keep them happy through company culture, benefits, work-life balance, career advancement, etc. Or you may find yourself hiring yet another candidate for this same role in a year, for even more money! The old adage is true: you get what you pay for.
Employers are increasingly seeing value in real talent, so they’re less likely to jeopardize a well-suited employee by not meeting market salary. Focusing on employee retention and meeting internal hiring needs should be top priorities for employers. Make time to listen to what is driving employees to seek new opportunities, and adjust accordingly.