At a time when inflationary pressures mean real wages are falling, and staff shortages are rife in many industries, many employers simply can’t afford to increase salaries. So, what else can they do to recruit and retain staff?
Some industry sectors are struggling more than others to find the right people to fill posts, particularly those experiencing worker shortages due to the departure of many EU workers after Brexit and Covid. Employers across the board are anticipating that wage expectations will increase, due to hikes in energy and fuel costs and the rising cost of living. Combined with the planned increases in National Insurance Contributions and the National Living Wage that are due to take effect in April, businesses are being forced to find new ways to attract and retain staff.
While substantial salary increases are not an option for most small and medium-sized businesses that are seeing the effects of rising costs on their operating margins, it is still important to pitch rates of pay at a certain level. If hiring, businesses need to offer enough to get candidates through the door, while adding value to the overall reward package in other ways.
People looking for work in a market where there is low unemployment and high vacancy rates expect prospective employers to do more to draw them to the business. For example, incentives such as a clear career path to higher pay levels and opportunities for training and development. Many candidates are also attracted to businesses that reflect their own values and beliefs, with a strong sense of purpose that might involve for example protecting the environment or giving back to the local community.
1. Increase Hourly Rate
For businesses operating in low-margin industries, where pay levels are low, the best way to attract and retain workers starts with applying any possible increase to the hourly rate. However, there may be other low-cost ways to add value to workers’ rewards whilst demonstrating care for employees and some differentiation from competitors. For example, a Health Cash Plan is a relatively inexpensive benefit, which in addition to helping employees to meet the costs of routine medical expenses, can come with add-ons such as employee assistance programmes or discount schemes.
2. Offering Flexible Working
Flexible working arrangements are often highly valued by existing employees and candidates alike and employers should ensure that policies are communicated clearly. Changes to ways of working during the pandemic have led to a much wider expectation that an element of flexible and/or home working will be allowed and businesses that fail to recognise this could struggle to retain staff and find they have reduced access to the talent pool when they try to recruit.
3. Reward Loyalty
Where business leaders have succession planning in mind, they may need to tie in key employees and reward their loyalty. Introducing a tax-beneficial share option scheme, such as the Enterprise Management Incentive (EMI) scheme, allows businesses to reward staff in a tax-efficient manner by allowing them to purchase shares in the company at some point in the future. Not only is the sale of these shares taxable at 10 per cent currently, but the status of being a shareholder within the business promotes a sense of pride and ownership.
4. Private Medical Insurance
At a time when more employers want to show they care about the health and wellbeing of their workforce, private medical insurance could also be a benefit worth considering. While the cost of such schemes can be off-putting, in a competitive employment market it may make sense for businesses to consider them. For larger businesses with more than 500 employees, it may be worth setting up a ‘Healthcare Trust’ as an alternative to a traditional PMI scheme. While these Trusts place more responsibility on the employer and have more fixed costs attached, they can be delivered cost-effectively.
Recruiting and retaining talent has probably never been more challenging for employers, but developing the right pay and remuneration package, which is designed to meet the needs and expectations of employees, can make all the difference.
About the author: Ed Hussey is director of people solutions at accountancy firm, Menzies LLP.