As we enter the new financial year, many businesses will be starting to think about their budget for the year ahead…
For many, a major part of this process will include budgeting for taking on new staff. Given the current climate, we are noticing increased anxiety among business owners and hiring managers around the associated costs of hiring new staff. Understanding how much the market has changed over the last year or so should be high on every business leader and decision makers agenda, as these changes should inform the trends, salaries, and budgets for the year ahead.
Business as usual or a new normal?
Many business leaders may be looking back at their previous budgets and wondering when costs may start to decrease, and when salary inflation might slow down. For many, there seems to be a hope still to see a return to ‘business as usual,’ before all of the events that lead us to the current hiring market we are seeing now. But the fact of the matter is, all the factors that have been having an impact on rising salaries and a highly competitive jobs market in the previous year are still at play now.
Consider the current climate as a whole: the looming possibility of a recession coupled with inflation and the rising cost of living are all significant drivers for employers to exercise caution in offering higher starting salaries; however, these same factors are all impacting prospective employees too, and many will be looking for a higher salary to compensate for rising living costs. Data published by the ONS has revealed that regular pay excluding bonuses grew by 6.5% in November to January, but in reality, regular pay in real terms fell by 2.4% in November to January due to rising inflation.
From the seismic changes to business norms enforced by the onset of the pandemic, to the current rising cost of living crisis, no one can truly predict with any confidence when the stopping point may be, or when the bubble will burst; or, in fact, if it ever will. Either way, we aren’t like to see an end to inflated salaries in the current jobs market any time soon and, as such, businesses must begin to embrace a ‘new normal’.
Think outside the box
It may, therefore, be time to start thinking outside the box. For example, instead of assessing individuals purely on the monetary return you will gain from hiring them, begin to assess the value of the individuals you are bringing on as a whole. An individual you are bringing into the business isn’t purely the money they make you: thinking about the number of years of experience they are bringing with them, the value this can add to your team, and the value they can share with others within the business. Consider the total impact of employees rather than purely their financial impact.
Equally, consider whether your hiring needs are able to pivot and adapt: could the hard-to-fill role you have open be adapted to suit a lower-level employee instead, which in turn will aid your senior-level employees and allow them to be more productive by taking away part of their workload? Or, if this is not an option, have you considered hiring a contractor instead? Hiring a contractor significantly minimises risk, as it allows you to hire an experienced and highly efficient specialist to support the business with specific projects, without the ongoing financial commitment of hiring a salaried employee.
Either way, it’s important to consider the true cost of not taking on an employee that you need. If productivity suffers, if deadlines can’t be met and targets can’t be delivered on, what is the true cost of this inactivity in the long term? Hiring is a significant cost to businesses, but the true cost of being unable to grow and progress the business is ordinarily much more significant.
Stay informed
When it comes to making decisions about your business, knowing what is happening in the wider market can be particularly useful. While there’s a lot of information out there already, which is widely available with a little research, on how other businesses are doing and what current trends are impacting the market more generally, this information is fairly top-level. Equally, we will often hear from our consultants operating in different markets and areas within the UK that different factors are far more prevalent and having a greater impact from one area to the next. So, if you are looking for a more granular level of detail, and information which is specific and tailored to your region and market, speaking to a specialist consultant for their advice and insight is the best way to do this.
Where are you benchmarking?
Businesses should now be considering their position as a whole. What are the priorities for the year ahead? Are there projects, targets or goals in the pipeline that require particular skillsets or are likely to increase workloads? Is your priority taking on new people to further your growth this year, or retaining the existing talent that you have?
Whatever your goals for the financial year are, the fact of the matter is that businesses that intend to move forward in 2023 must offer salaries that are competitive enough to secure the staff they need. It’s essential to ensure you are budgeting for salaries correctly, and the best way to do this is to benchmark your business within your sector: not understanding how your salaries compare with market averages puts you at real risk of failure in both attracting and retaining staff.
Salaray Surveys 2023