Evaluating Compensation for Today’s Market Conditions
March 17, 2023
At a glance
- The main takeaway: Most industries are still in an employee-driven talent market. Companies need to keep a pulse on current market conditions and adjust accordingly to stay competitive.
- Impact on your business: Proactive market analysis can help you avoid massive wage disruptions when you need mission-critical talent and can also boost your brand reputation with job seekers.
- Next steps: Partner with a team of recruiting specialists to help widen your talent pool and get the best-fit person in line with your company’s budget.
Get in touch with Aprio Talent Solutions today
The full story:
Imagine you have a long-time employee making $125,000 a year. This person is looking to retire, and you need to backfill their role for the first time in 20+ years. Can you get new, same-quality talent at the same rate?
Now, let’s say that the current market rate for that position is actually $175,000 — a 66% increase — and that the role will report to a vice president who makes $175,000. In this case, it isn’t just the individual wage jump that poses a problem; hiring at the new rate would have a cascading effect on wages across the organization.
This is the predicament that companies across the globe are facing in today’s market.
There’s no universal formula for compensation. The market is constantly in flux, and organizations need to stay agile. In order to protect your talent, and your ability to attract new people, it’s important that you’re always checking your company’s pulse, your compensation levels and the market.
Here are the factors impacting compensation and talent trends right now:
Double whammy pay discrepancies
Over the last couple of years, we’ve seen a surge in employee compensation. This can create pay discrepancies, with new talent earning proportionately higher wages than tenured staff. Stack that on top of standard merit increases that aren’t keeping pace with inflation and you have a recipe for employee discontent.
Companies that embrace the situation can be more strategic about their wage increases. Conduct a wage and market analysis and think through how you’ll adjust before you’re forced into a reactive position.
Poaching and defense
Organizations that are sound and in a good financial position are more inclined to poach talent from weaker competitors. After all, if you can pay more and your work environment is more flexible, you can go out and get those talented high performers.
That’s the reality of the talent market right now. As an employer, you need to make sure you’re taking care of your team and maintaining the talent you have. Focus on who is present.
There has been a groundswell of complaints that employers are making the hiring process too arduous. Often, companies will subject candidates to five or more interviews, test projects, intelligence tests and culture assessments, which can be both cumbersome and exhausting.
Some candidates, especially millennials and Gen Zers, will see these hiring hoops as an indication of broader company culture — inefficient, demanding and short on what it means to be human in the workplace. The best candidates have options, and they’re going to choose the company that isn’t putting them through the ringer.
Employer value proposition
Despite the competitive talent market, we still run into employers who think that hiring is a one-way vetting process. Today, it is no longer enough to offer someone a job with a good salary. You need to articulate why they should want to work for you. Be ready to share information about your company’s culture and its values during interviews; these are key considerations for a new candidate.
For example, we worked with a client who was so pleased with a candidate, they offered her a position right away after the first interview. But when the candidate asked for an additional conversation, the employer felt a little offended: “She wants to interview us?!” (Well, yes.)
Think of the recruiting and hiring process like a marriage. Both people have to walk down the aisle and say, “I do.” If you get there before the candidate does, then you have to try to convince them you’re the right fit.
Pay transparency — and pay secrecy
Pay transparency laws have gone into effect in New York City as well as seven states: California, Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington. Generally, these laws require companies to post salary ranges with their job postings.
Now employees will have a better idea of how their salary stacks up. This added transparency will put new pressure on companies to modify compensation and keep pace with the competition.
Likewise, roughly 30 states have enacted some kind of salary history bans
We expect to see these laws expand and evolve across the country. Be sure that you, and anyone involved in your hiring process, knows and adheres to current regulations.
In addition to level-setting compensation to match industry competitors and expectations, leaders also need to make sure that offers and raises take important economic and societal shifts into account. Employees and candidates are looking for salary offers and raises that are commensurate with their financial reality. If you can’t match inflation, then explore this article that explains alternative ways to support your staff and boost retention.
The bottom line
Compensation is really a matter of what the market will bear. You won’t know what’s doable until you go out and see who’s willing to make a change. Aprio Talent Solutions can help widen your candidate pool. We deliver higher-quality candidates and then help guide you through negotiations so you can find the best-fit person for the right-price compensation package that works for your business.
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Schedule a call and connect with our team today.
About the Author
I provide advisory and digital transformation and IT solutions to businesses of all sizes — from start-ups to Fortune 500 companies. I advise C-level executives and key business decision-makers, as well as technology, sales and marketing professionals. My solutions are relevant to any industry, but I primarily focus on the healthcare, financial services, consumer goods, manufacturing and retail sectors.