Don’t be tempted to lowball on salaries during times of economic uncertainty
by Daniella Klein
Determining your salary offerings can be a challenge at the best of times, but economic uncertainty can make it a more complicated process. Some of the top challenges hiring decision makers face when recruiting include:
- Finding high-calibre candidates
- Budget constraints
- Trouble competing with compensation and benefits packages at other firms
When you’re already very conscious of your cash flow and protecting profitability at all costs, the idea of offering a competitive salary may seem counterintuitive.
Learn from the mistakes of the past
Indeed, this was the attitude of many in the previous recession, and many employers decided to lowball their salary offerings, taking advantage of the many candidates so desperately in need of a job that they significantly undersold themselves. This created a very fleeting victory on the part of the employers, as, unsurprisingly, when the economy began to pick up again those underpaid employees jumped ship at the first opportunity they could, in order to get a role that would pay them closer to their worth. Those employers who had thought they’d solved their talent shortage for a bargain found their businesses seeing an exodus of their workforce and quickly had to find more employees or face complete collapse.
Lesson learned, offering an attractive salary along with the right employee benefits can have a very positive effect on your company in the long term. It may seem obvious that candidates are looking for opportunities that offer good remuneration packages, but often employers can forget the reason why this is so important to jobseekers amidst the financial pressures their own business is under.
While higher base pay has the obvious benefit of enabling a higher standard of living; the less tangible benefits – like feeling valued for their contributions, getting recognition for a job well done and feeling they are paid fairly – are those elements that not only deliver higher levels of morale and motivation, but can help retain valued employees for the long term.
The benefits of offering fair and just compensation:
- Attracts a higher calibre of candidate
Offering a higher salary can indicate the higher expectations of the quality of work expected. This may deter some applicants who may not have the required experience and encourage those highly-skilled individuals who are going to elevate or upskill your team, and benefit your business in the long term.
- Creates a high level of output
Offering higher-than-average salaries, as mentioned above, will attract a higher calibre of employee who will then work harder to demonstrate that they deserve the compensation. While pay and incentive schemes may not be the only motivating factors for many people, they certainly help people proactively take on more work and complete projects on time.
- Reduces employee turnover
Employees who feel like they’re being paid their worth are happier to stay in their current role. Offering fair salaries and evidencing a strong career path will help decrease employee turnover. In fact, on average, a 10% higher base pay is associated with a 10.5% higher chance that a worker will stay at the company for their next role.[i]
- Improves employee satisfaction
Employees who feel they are fairly compensated and recognised for their work have higher levels of employee satisfaction. Furthermore, with less financial pressures and the ability to save for life’s milestones, providing adequate pay will help employees find greater personal and professional satisfaction across all areas of their lives.
Happier employees have also been actively linked to higher productivity and 39% of workers will work harder and increase their productivity at work if they are happy.[ii]
- Improves your reputation as an employer
Through a combination of the points mentioned above, offering higher salaries and having happier employees will improve your reputation as an employer of choice, which will, again, contribute to attracting a better quality of applicant whilst keeping existing employee turnover low.
This means you can view each employee as more of a long-term investment who will continue to learn and develop in line with your company. This is also a more cost-effective recruitment model, as ACAS has identified that, on average, the cost to employers of replacing a single member of staff is more than £30,000 on top of the base pay salary offering.[iii]
In many ways, the benefits outweigh the costs of offering attractive base pay offerings. Particularly in times of uncertainty, it is important to remember that the hard work of your employees, their problem solving skills and drive, are going to be the saving graces that allow you to have a strong entry to next year. Building a strong and dynamic team is of the utmost importance to driving growth and profitability, acquiring more clients, or increasing sales.
This means it’s incredibly important to offer a competitive salary that’s attractive and benchmarked against those offered by your competitors. But how do you assess what the current market rate is for your industry and job role you’re advertising?
The Heat Recruitment 2021 Salary Survey
My colleagues and I have been working hard over the last few months to assess the current recruitment market and have created a helpful – and importantly free – salary survey that spans the financial services, legal, insurance, engineering and tech & digital industries. The Heat Recruitment 2021 Salary Survey is your definitive guide to understanding starting salaries across the UK, taking into account both London averages and regional offerings.
Assessing the current economic and social factors impacting salary expectations across our specialist industries, we have generated insightful considerations for hiring managers looking to recruit in the coming months and even years. We have drawn our data from our extensive network of hiring managers, candidates and our own specialist consultants to make sure you have the most accurate information to hand to create a competitive and attractive salary package to attract the talent you need to deliver business growth.
However, it doesn’t end with your salary offerings …
More than ever, applicants are looking for more than just a good base salary to incentivise them to apply to job vacancies. Top candidates are looking for:
- Attractive bonus structures
- Good career progression
- Flexible working opportunities
- Innovative employers
- Forward-thinking technology and processes
- An employer with good corporate social responsibility ideals
To find ways to balance your salary offering with your additional incentives, my colleagues and I would be happy to help you create an overarching strategy to attract the top talent on the market in a sustainable, and profitable way to support future growth. In times of uncertainty, your employees are your most valuable asset, so it’s important to get this right, and it’s important to remember that the cost of engaging a recruiter will be less than the cost of replacing an existing employee, or employing the wrong person for the job!