One of the biggest questions we get from our clients nowadays relates to the incredible acceleration of salary expectations against rising economic inflation.
Workers are facing higher costs from their landlords, grocery stores and at the gas pump and are expecting their employers to increase salaries accordingly.
And while we do find there are non-monetary incentives that can inspire your employees to stay with the company, at the end of the day, money talks. So what’s an employer to do if they want to attract top talent?
Why Inflation is in the News
Inflation is all over the news, as the Fed is preparing to raise interest rates for the first time since 2018. During the pandemic, the Fed has wanted to keep cash flowing as much as possible and thus has kept rates low, but inflation has been surging to 7.9% last month, the highest rate of increase since 1982. From home prices to gas to salaries to the cost of a gallon of milk, consumers are feeling the pinch.
How Inflation Affects Salary Negotiations
Such unprecedented inflation is having a big impact in the recruiting field, as we find that employees are looking for bigger and bigger salary boosts. Exacerbating the problem is a tight labor market, the so-called “Great Resignation,” and workers are itching to change companies. In our talks with clients, we are finding that they have to adjust their expectations rapidly in terms of the cost of acquiring talent in such an environment.
How Worker Mobility is Affecting Salary Negotiations
Another big trend we are seeing in the recruiting world is increased worker mobility. Workers want the option to be fully remote, and one of the reasons is that they can opt to live in a low COL area, or simply be nomadic.
Candidates want flexibility, but that often comes at a price, as employers electing to make a position fully remote can use that factor to encourage their workers to reside in a lower cost of living environment.
How Employers in High COL Areas are Approaching Salary
Employers in high COL markets like New York have some important choices to make. Some employers, like Goldman Sachs, are looking at changing their base of operations and reducing their footprint in the most expensive real estate market in the country.
Still other industries, such as fashion, cosmetics, financial services and hospitality rightly recognize that they need to maintain a base of operations in the cities where their most important customers and partners reside.
Our Advice to Employers
As employers navigate a tight job market and rising inflation, our biggest piece of advice is to be flexible and realistic in crafting a salary package:
- In 2022, candidates are contending with a sharply rising COL, especially in terms of housing costs
- Compensation is always the biggest factor in attracting top talent to a position
- Reducing commuting costs, by offering fully remote positions, can be a significant incentive to workers
- Other non-monetary forms of compensation can be useful to making your offer most attractive
Need more help?
Crafting an attractive compensation package in a tight labor market is just one of the ways we work with clients to help them attract top talent. Need more help? Contact us.