Planning to Hire? Let’s Talk About Pay
Last month we talked about the tight labor market and some of the difficulties it will present for employers during 2019 and beyond. This month’s focus is the unique compensation challenges that occur when hiring a new employee.
Here’s the too-frequent dilemma. You find the perfect candidate for your open accounting position. They have the right skills, experience in your industry, appropriate credentials – everything you could want. There is just one problem – they want a starting salary that is $10,000 more than you are paying your other employees who do the same job.
Maybe this happens because you are not paying your current employees enough. Maybe your labor market is particularly competitive and that has caused wages to rise. It’s particularly frustrating if you have done your homework and tried to set your pay rates to be competitive with the market, and now you have to pay above market to hire someone with the skills you need.
In any event, this is a complex issue with no simple solution. There are some steps, though, that you can take to land that candidate without creating compensation chaos in the rest of the organization:
1. Do Your Homework – Up Front
Before you even begin the recruiting process, make sure you are aware of current market salaries for the position(s) you are recruiting for. If you haven’t looked at market salaries in a while, get ready for some sticker shock, especially if you are in an area that is experiencing high job growth. It is also important that you understand who your competitors are for talent in your recruiting market(s). Often your competitors won’t be in the same industry. Several years ago a regional bank client lost the entire accounting department to a state tax department regional office that opened in the same small city.
2. Get Creative with One Time Payments
The one-time sign on bonus is the most common, but there are lots of other options. These payments can be structured to be paid out all at once or in multiple payments. Payments don’t always need to be up front, either. They can be attached to length or service or some type of defined performance milestone(s). Or split any way that can be easily communicated and is achievable.
3. Get Creative with Benefits
Most organizations don’t do a good job of communicating this, but a typical benefit package is “worth” 30% – 35% of base salary. It’s possible to create a customized benefit package for a potential new hire that includes offerings like paying off student debt or credit card debt, an extra week of paid vacation, an increased contribution to health insurance, and/or reimbursement for continuing education. Presenting a total compensation package, rather than a straight salary offer, may be the key to landing that candidate you want.
4. Consider More Frequent Salary Increases
It’s pretty common to give new employees an increase after 6 months, but a large number of organizations are giving increases after 3 months. If you’re having difficulty meeting the salary that a potential new hire is seeking, maybe negotiating for a somewhat lower salary up front and an increase after a shorter wait time will help you land that candidate. This type of strategy can be particularly effective with entry-level employees in industries such as retail and food service, where turnover during the first 6 months of employment frequently exceeds 50%.
5. Get Creative with Flexible Schedules
Many employers have been successful at retaining valuable employees because they looked beyond the constraints of the usual 5-day work week. That might include working shorter hours, a 4-day week, working at home one or more days, or working a schedule based on the availability of public transportation. And some employees might actually prefer working on a weekend day, when they don’t have to take their children to school or day care or contend with homework and after-school activities. Alternative scheduling approaches can be particularly helpful in retaining entry-level employees, who frequently struggle with childcare and transportation issues.
6. Make Sure Your Compensation Policies Reflect Market Reality
If you have written compensation policies that haven’t been reviewed or updated, it is time to do this. You may not be able to follow those policies in today’s tight labor market. For example, organizations with more formal salary structures (pay bands or salary grades) often have policies that state new hires will be hired at a certain position or in a specific quartile of the salary range. These days that often isn’t realistic or doable.
Bottom line – get creative to successfully meet today’s recruitment challenges. And if you need any help with your compensation needs, give us at Affinity HR Group a call!
By Susan Palé, CCP – Affinity HR Group, Inc.