The cumulation of a growing skills gap and ongoing labour shortage has created a candidate-driven market.
This shift, in turn, has significantly changed workers' salary expectations.
For example, workers in many areas of the world are less likely to accept stagnant wages because they now have more options available.
When you combine these factors with the current inflation concerns, it's easy to see why salaries are rising. To prove this point, a recent study reveals that 96% of employers worldwide expect to increase wages in 2022. That's a vast number of employers.
Still, the unavoidable truth is that for companies to acquire and retain talent, they must offer competitive pay and benefits, also known as rewards.
global salary increases
While these increasing salaries seem to reach all corners of the world, there are some regions where growth is not as strong. For example, the World Economic Forum estimates that only 50% of employers in the Middle East and Africa will raise salaries in 2022.
The reasons for this slow growth in these areas are complex. For instance, Africa is home to dozens of developing countries hit hard by the pandemic. It will take time for these countries to recover before salary increases occur.
However, professionals working in developed areas of Africa will likely see pay hikes in 2022.
For example, the South African government announced that employers in the country are planning an average pay increase of 5.5%. This represents a higher anticipated pay increase than predictions for U.S. workers (3.4%) and workers in the U.K. (4%). Likely, pay raises will directly relate to the business's (or, in some cases, the country's) ability to recover from the pandemic.
Inflation is another driving force behind salary increases. For example, inflation is out of control in Venezuela. These increasing costs led to a 289% increase in minimum wage rates in 2021, and a similar pay hike is expected for 2022. Areas, where inflation is not as concerning are not likely to see as high of a pay increase.
For example, Japan currently has an inflation rate of 0.5%, and it's only expected to see an average pay increase of 2.6% in 2022.
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salaries affecting employee retention
While salaries have always been one of the biggest drivers for changing jobs, today’s competitive job market gives workers the power to expect more.
As you know, the ‘Great Resignation’ has bombarded headlines in 2021, but there’s no denying workers leave their jobs in droves.
In the United States alone, 4.5 million workers quit their jobs in November 2021. This phenomenon is not just happening in North America.
Our latest Randstad Employer Brand Research report reveals that:
- 12% of worldwide workers will leave their jobs in 2021
- 20% expect to change careers in 2022
Sure, there are many reasons workers leave their jobs; better work-life balance, remote work options and improved training opportunities. Some are even leaving the job market altogether. Despite these factors, our research shows that salaries and benefits remain the primary motivator for workers changing jobs.
Like any other service on the market, salaries are based on supply and demand. With 54% of companies worldwide citing a talent shortage, there is a high demand for talent. This demand is even higher for skilled labour since the worldwide skills gap affected employers’ hiring abilities long before the pandemic hit.
With this increase in demand has come a rise in expected wage offerings. Workers’ expectations are so strong that employees are willing to change jobs to obtain the pay and benefits they feel they deserve.
In short, if your company doesn’t invest in developing a competitive compensation package, it will likely lose some of its top talents.
what does this mean for you?
Whether your company is facing employee retention challenges or not, now is the time to consider evaluating salaries and improving your benefits package. The good news is that there are a variety of advantages your company can realise by improving your compensation package, such as:
improved retention rates
Studies show a direct link between higher pay and higher employee retention rates. A recent study by Harvard University shows that a $1 per hour pay increase among warehouse workers resulted in a 2.8% increase in retention.
Even more alarming results show that every $1 per hour loss in pay resulted in a 28% increase in turnover rates. It’s pretty simple if your company isn’t offering competitive salaries, your current workers are more likely to leave.
Even if your company is not experiencing a significant labour shortage right now, it likely will in the future. The reality is that the talent shortage isn’t expected to end any time soon.
Some experts predict that there could be a global talent shortage of over 85 million workers by 2030. Not taking steps to prepare your company today could make it nearly impossible to meet your staffing needs in the future.
A wage increase can pay for itself when done right, providing an excellent ROI. The trick is to identify the optimal salary package that is powerful enough to retain your current workers while aligning with the company budget.
When the optimal salary range is determined, your company can save through reduced overtime pay, lower absenteeism and decreased hiring costs.
better hiring outcomes
Let’s face it. Despite all your efforts, 100% employee retention is not achievable. Employees will leave, and these positions must be filled. With the labour shortage growing and the skills gap widening, attracting talent will become more and more difficult.
A competitive compensation and benefits package can help your company attract qualified candidates and entice them to accept the job offer.
improving employee compensation and benefits
Developing a competitive employee compensation package cannot be an afterthought, nor should it be done in haste. Instead, you should create a well-thought-out compensation strategy that aligns with your company's vision and business strategy. Having a plan in place can help your company remain competitive for years to come.
Here's a look at some things to consider when establishing a company's workers' compensation and benefits strategy.
As an employer, staying current on average salary offerings for your respective industry is critical. Using this information is a good starting point and can help you determine if your current salary range is above, on or below average for your market.
At Randstad, we conduct an annual salary survey in many markets and provide the results in a user-friendly report. Job roles break down salaries in our account to make it easy for your company to compare its salary offerings with other employers. Keep in mind, of course, that job titles mean different things to different employers.
So, it would be best to consider each role's specific duties and qualifications when comparing.
know the competition
Understanding salary trends in your respective industry is a significant first step, but you must also know your direct competition.
For example, manufacturers need to understand salary trends in the manufacturing industry. It's equally important, however, for these employers to know what types of compensation and benefits other manufacturers hiring in their local area are offering their employees and new hires.
Conducting a comprehensive competitor analysis can provide the insights you need.
salaries aren't everything
While it's true that salaries are, and probably always will be, a top motivator for employees changing jobs, today's workers want more. Workers' expectations regarding benefits have changed significantly since the pandemic.
For example, our latest Randstad Employer Brand Research shows that a healthy work-life balance is the second leading motivator for changing jobs. Employees seek meaningful benefits, such as hybrid work, flexible work schedules, more paid time off and family leave guarantees to meet this need.
Therefore, employers that want to prevent their workers from leaving must create a benefits package that allows employees to maintain a healthy work-life balance.
Additionally, today's employees care about job security and career growth. They understand that the world is changing and digital skills are in high demand.
To ensure their employability in the years to come, these workers want more training, career development and advancement opportunities. Offering these benefits can build loyalty with your workers and make them less likely to change jobs.
To create a compensation package that drives higher employee retention rates, it's essential to include competitive wages and meaningful employee benefits. Higher salaries without corresponding benefits that improve the life of your employees may not be enough to keep your workers from changing jobs.
On the other hand, benefits without competitive salaries won't be enough either. Only when competitive wages and meaningful benefits go hand-in-hand can your company obtain the improved retention rate it desires.
Learn more about how to build an employee compensation package by downloading our list of the top 10 benefits employees want.get your copy