Businesses need to keep a close eye on compensation practices.
There is good news and bad news regarding the workforce environment in central Ohio. The good news is our vibrant and growing economy. Central Ohio employment growth will continue its 10-year run of outpacing US job growth in 2017 and, according to economic research firm Regionomics, will add 16,300 jobs this year. This is a 1.5 percent increase from 1.06 million in 2016.
The challenge for central Ohio employers is candidates are now often in the driver’s seat. During the last recession when unemployment was high, many people were happy if they managed to avoid a layoff and hang on to their job. Now the tide has turned. Employers in the Columbus area are scrambling for qualified candidates in technology, health care, construction, logistics management, hospitality, and more.
When you talk to recruiters, they are not waiting for qualified people to apply for open positions. Rather, they are aggressively scouring their networks for passive candidates who can be encouraged to consider a change. You can bet that the carrots used to entice prospective talent include higher pay, benefits, bonuses and other perks. If you are among the many businesses seeking outstanding candidates, then your challenge may be not only to recruit, but also to retain the talent you have. Below is a checklist of some areas to assess:
Are you compensating employees based on their current skillsets?
With technology and other forces changing the way we do business rapidly, is your company keeping pace in compensating talent for their increasing skillsets?
Is the compensation you offer in line with the market?
With competition for candidates becoming fiercer, particularly in the Columbus market, are you sure your pay is competitive? If your last market study was over two years ago, it’s time to reevaluate pay again.
Have you paid higher wages to incoming recruits without assessing your current staff’s compensation?
Pay compression is one of the most common wage problem organizations face. This is most likely to occur when companies pay above the minimum of their pay ranges for new employees, but do not adjust current employees’ pay. Pay can then be ‘compressed’ so less inexperienced employees are receiving comparable pay to those senior staff members who have deeper knowledge and proficiencies. When discovered, this can lead to ‘brain drain,’ where experienced employees leave due to perceptions of unfairness.
Are you offering bonuses, incentives, or other variable pay?
During the last recession, annual pay increases were negligible or nonexistent. Since then, salary budgets have not climbed to pre-recession days, but remain in the 2.5 percent to 3 percent range. With another recession predicted, businesses are cautious about raising fixed costs. A rise in variable pay plans has been one way many companies have addressed the need to offer competitive pay while protecting their business against future economic downturns.
Reassess your benefits package.
Shrewd employers, employees, and candidates will assess the total compensation package, including not just base pay and bonuses, but also health care premium costs, retirement benefits, and paid time off, to name a few. When assessing the total compensation for employees make sure that once competitive, you communicate this both as a recruiting and retention tool.
June DeLeo is Principal and Senior Consultant for HR Response, a firm that implements strategies to provide measurable, value-added outcomes to improve business operations. For more information, please visit hrresponse.com/home.html.