No doubt you have heard the terms ‘the Great Resignation’, ‘the War for Talent’ and ‘Overheating Economy’. As many of you have discovered first-hand, the labour market is currently facing a supply and demand shock due to unusual and volatile forces happening around the world. In New Zealand the labour market is very tight with an unemployment rate of 3.2% – the lowest it has been since 2007 (Stats NZ, 2022).
In March 2022 online job adverts were 31% higher than rates in March 2019 (MBIE, 2022). We also continue to observe the ‘Great Resignation’ with reports of even higher levels of turnover at present. At the same time, significant economic pressures have resulted in the current CPI of 7.3% (Stats NZ, 2022) and an ‘Overheated Economy’.
Organisations looking to recruit staff are finding that the convergence of market forces has resulted in a smaller talent pool, more job advertisements, and a marked shift in candidate expectations. These are all typical of a ‘War for Talent’.
So, what does all this mean for your organisation, and what can you do to retain key staff and recruit talent during these tough times?
Pressure Points for Organisations
There are some key dynamics that your organisation may be experiencing.
- You may be finding it is harder to secure suitable candidates for vacancies with multiple returns to the recruitment market. Positions you may have received 60+ applications for pre-COVID may now only attract 2-3 applications.
- Flexible work arrangements are widening the geography of the labour market. You may not realise it, but for some roles you are competing nationally or even globally. Strategic Pay is anecdotally aware of uptake in international recruitment/employment of New Zealand workers, especially in the IT industry.
- Candidates now have higher expectations around remuneration and packages.
- Organisations are reporting that staff have been lured to competitors with offers of larger remuneration packages, sign-on payments, and additional benefits.
- Not wanting to be left behind, your current employees are also likely to have higher expectations because they are aware of the market dynamics.
Key Risks Organisations Face
How do the pressure points translate into risk for your organisation?
- Impact on productivity with too few staff on board.
- Your organisation may not be able to afford the expectations of both candidates and employees.
- There is the risk of losing key employees who are high performers; in business-critical roles or have roles that are hard to recruit for.
- The risk of staff burnout due to increased workloads, especially covering vacancies. At present this is amplified by high levels of sickness throughout the country. Burnout can lead to disengagement with the organisation and increased turnover.
- The ‘War for Talent’ means your staff will be headhunted by other organisations and leave for new opportunities.
- Your response to this environment could create anomalies or pay outliers and risk creating pay compression between roles (hiring a new employee with a package that is close to senior employees).
- Managers may end up adjusting current employee packages based on anecdotal information rather than up-to-date data.
- Exceeding the organisation’s recruitment and remuneration budgets.
How to Mitigate the Risk of Losing Staff
So, what can you do? We recommend you start by ensuring you don’t lose key staff by identifying your critical talent, high performers, or hard-to-recruit positions. Then, meet with your people to understand their needs, goals and aspirations and check that they are appropriately remunerated for their contribution.
You may want to show key employees that you value them by way of bonus or retention payments. Long-term incentives are also worth considering. These are typically set up as a mechanism to secure talent and high performance/productivity over an extended time horizon.
Do take a measured approach to employees who advise you that they have a higher offer of employment by another organisation (or mention higher rates of pay/premiums elsewhere).
There are key questions to probe before responding:
- Are the jobs the same size/type?
- Can they confirm the offered package?
- Is the organisation making the offer in a similar industry with the same pressures or are they in a more competitive industry that provides higher rates?
- Confirm if the employee is considered critical talent, a high performing worker or in a hard-to-recruit role?
Think strategically about how to build career pathways that enable you to ‘Grow versus Buy’. This could include role enrichment and training opportunities. Succession planning/training to ensure you have cover for vacancies could be a good starting point.
Are there opportunities to review your organisation’s structure and design, enabling you to change or combine positions to avoid recruitment?
A very important key step is to support good decision-making by ensuring your remuneration policy is up to date and includes a framework for recruitment offers. Do review your remuneration practices and identify and resolve any issues. It is important to ensure your policy and practices are fair, defensible and applied consistently.
Tips for Recruitment
Most organisations can do quite a lot to strengthen their candidate pipeline, starting with ensuring you clearly understand your brand, your point of difference and what you can offer. This enables you to articulate why a candidate should consider working for you.
- Do review and widen your recruitment advertising. Is your advertising compelling? Are you advertising where candidates are likely to see the adverts? Adverting on job boards isn’t enough now, you will need to tap into all relevant channels of social media and actively headhunt talent.
- Do you contact ex-employees as part of your talent pool? How about engaging your current employees by offering a finder’s fee for successful placements?
- Review your selection criteria. Stating higher than required levels of qualification and experience to try and secure the ‘best’ candidate may end up excluding suitable applicants.
- As much as possible, fully communicate the terms and conditions that make up your Employee Value Proposition (EVP). This includes clarity on the nature of the work; organisational reputation; pay; hours of work; benefits; leave; flexibility; culture etc.
- Do indicate the value of both base salary plus all guaranteed benefits (Fixed Remuneration). This may assist in selling the overall package to applicants. Sometimes including pay ranges can also be helpful.
- Screen carefully to ensure you select candidates who are a good fit with your organisation and likely to remain for a reasonable time.
- Lastly, for those workers who are heading off on delayed OE’s, consider keeping in contact with this ‘employee alumni’ group. Many could return to NZ and potentially back to your organisation.
Labour ‘Supply and Demand Shock’ can be a very difficult period to recruit in, and it is challenging to remain market competitive without exceeding budgets or creating anomalies within your organisation.
The key to managing this process will be to take a measured approach, be proactive and take actions internally to mitigate any risk including reviewing and reconfirming your remuneration budget. Support your managers, giving them the tools and information to be able to have hard conversations with employees and manage the expectations of external candidates.
Always ensure that offers for external candidates are logical with respect to your current employees. Finally, providing clarity in your communication both inside and outside the organisation will be critical during this period. By implementing these suggestions when recruiting, you should be more prepared to succeed in this uncertain market.
If you require specific market information or remuneration information to assist in your recruitment search, then please contact one of our Strategic Pay consultants for further details.
Strategic Pay Consultant