The skills shortages across the UK are well-documented. The Office for National Statistics (ONS) has spent much of 2022 reporting record-breaking vacancy increases while unemployment numbers dropped, limiting the supply of talent. Business leaders have been widely vocal on the challenges they face finding resources, with many inflating salaries in order to attract employees. But pay is not enough for truly strategic talent attraction and retention.
In fact, in our latest joint research report with the CIPD, remuneration really stood out as a key challenge for today’s employers.
A tough talent landscape
Now in its twenty-third year, the Resourcing and Talent Planning Report 2022 highlighted the sheer scale of talent difficulties facing businesses of all shapes and sizes. Of the 1,000+ HR professionals surveyed, the vast majority (70%) revealed that the competition for well-qualified talent has increased in the last year. A further 60% highlighted difficulties retaining talent, which is perhaps unsurprising as more firms turn to head hunting and the impact of the Great Reshuffle continues to play out.
Interestingly, it appears that more senior and highly-qualified talent are of shortest supply at the moment. More than half (58%) of HR leaders indicated that top level and skilled roles were most difficult to recruit for. In comparison, just 26% found it hard to source low-skilled talent.
This increase in competition for talent and the increasingly shrinking talent pools can largely be attributed to the spikes in recruitment activity we’ve experienced post-Covid. As firms emerged from various lockdowns, we faced a unique scenario where almost everyone was hiring at the same time, putting significant pressure on HR teams, hiring managers and the recruitment market overall.
In fact, our study with the CIPD revealed that nearly three-quarters of organisations (72%) were trying to fil permanent positions in the 12 months leading up to April 2022, up from 65% the year before. An additional 49% were advertising temporary roles, up from 47% in 2021.
Using salary to attract talent
In this difficult talent environment, many organisations understandably turned to pay and benefits increases to bolster recruitment. Indeed, remuneration is now the most commonly used tool to improve retention, used by 54% of HR teams to keep people motivated, up twelve percentage points on 2021 figures.
Pay and benefits has also become the number one element of an employer brand, moving up from second place in 2021, surpassing organisational values. However, while financial incentives have clearly topped the list of talent attraction and retention methods in the modern world of work, it’s not a sustainable approach, particularly during a period of economic struggles where organisations are reigning in spend.
As Claire McCartney, senior resourcing and inclusion adviser for the CIPD, the professional body for HR and people development, explained:
“Businesses are facing some of the most challenging times imaginable in the coming year, with a cost-of-living crisis and potential recession. It is now more important than ever to be proactive with workforce planning and to develop compelling offerings to attract and retain a diverse group of employees. Employers won’t be able to afford continued pay increases, but they have an array of other options available to them to continue attracting and retaining employees.”
Pay is not enough, but what else can you offer?
While pay certainly has a role in talent attraction and retention, a more strategic approach is required that balances the needs of individuals with the abilities of the business. It’s all too easy to assume that we know what candidates want, but in truth it is so widely varied that focusing on one element alone will limit talent strategies.
If we take a look at Gen Z, for example, there’s a wealth of data that suggests this demographic wants more than just a job and a salary. They are more likely to be lured by meaningful work and career progression opportunities than inflated pay and benefits.
We also can’t overlook the fact that the world of work itself has drastically changed over the last few years. As a result, our corporate culture and company DNA is likely to have evolved drastically. It’s vital that employers take a step back and assess what their company looks like now, how their employee value proposition has adapted and what is really important to talent pools.
While vacancy numbers from the ONS suggest that recruitment activity is beginning to slow, competition for the best talent is still rife and will remain a challenge for some time still. In this environment, businesses need to take a more holistic approach to talent. Pay hikes are simply not enough to drive longer-term solutions.
Louise Shaw, Managing Director Omni adds: “There is a constant battle for top talent, and it’s important that businesses assess what they can realistically offer candidates and what they can improve upon to retain existing employees. Unrealistic salary inflation is not only unsustainable for employers, but will also have limited success long term, with retention rates likely to drop as financially-driven individuals jump ship to gain further pay increases. “Candidates want more than just good pay and are seeking meaningful jobs that are culturally and personally rewarding. Less forward-thinking organisations find themselves at the mercy of a labour market, the likes of which we haven’t seen before, with competition for skills creating retention pressures that recruitment cannot contend with. The resulting fight for talent is costly and not sustainable, hence organisations need to accelerate their plans towards ‘resourcing maturity’. Businesses that fail to think strategically run the risk of losing out in the competition for talent.”
Want to find out more? Download your copy of the Resourcing and Talent Planning Report 2022 today.
