In terms of labor and salaries, 2023 is shaping up to be a year of question marks and contradictions. Despite rising concerns of a recession, employers are still having a hard time filling open positions. Job postings remain 50% above their pre-COVID rates, according to the job site Indeed.
That demand for labor continues to impact budget expectations. Salary budgets have increased by 4.1% in 2022, according to The Conference Board’s Salary Increase Budget Survey. That’s even more than the expected bump of 3.6%. In 2023, salaries are predicted to grow higher yet, to 4.3%. That would be the highest salary increase since 2001.
However, The Conference Board also notes that salaries may increase through the first six months of 2023 and then decrease due to potential economic and labor market slowdowns.
Though the financial forecast remains murky, there is no doubt that salaries are currently rising at rates that haven’t been seen in decades.
According to Forbes, the primary reason for these salary budget increases is inflation. A Bank of America survey showed that more than 70% of employees are concerned that inflation is outpacing salary increases.
The survey also noted that compensation is the leading cause of employee resignations. A report by Robert Half revealed that 55% of employees think they are underpaid, and nearly half will ask for a higher salary in the coming months.
But is a higher salary alone the answer to curbing labor shortages that continue to plague businesses?
A snapshot of compensation offerings
Research by Ceridian suggests that wages may not be the single driving factor for winning the race for talent. According to its 2022 Pulse of Talent survey, 61% of the roughly 6,800 employees polled globally are flight risks. Close to 40% said they would leave their current employer for the right opportunity. And more than 20% are already looking for a new job.
Salary remains a top motivator, but good salaries alone aren’t likely to slow the rate of resignations. Ceridian concluded that burnout attributed to higher workloads, mental health challenges and insufficient compensation are all key drivers for employees seeking new opportunities.
While 46% of respondents in the Ceridian survey said they want a new job with a better compensation and benefits package, 33% said they desire more flexibility, including remote work options.
Other reasons employees are leaving their current employers (from most to least common) are:
- Lack of growth opportunities
- Desire for a career change
- Misalignment between their and their company’s values
- Poor relationships with managers
- Lack of job security
- Not liking their work
- Performing work that doesn’t align with their skills
What else do employees want?
With a recession looming, the importance of job security is climbing. CNBC reports that just 20% of employees feel secure in their positions. But, for now, employees also show a willingness to leave jobs that don’t offer flexibility, work-life balance and supportive work environments.
According to a survey from the compensation software provider Beqom, other trends in pay and benefits include:
- Better pay transparency in job posts — Of the employees polled, 61% said they would be more likely to apply for work with salary information in the job advertisement.
- Remote work options — A staggering 80% of workers said the option to work remotely is expected and is no longer a nice-to-have. And 65% said they’d take a pay cut to work from home.
- Flexible hours — More than 80% said they expect flexible hours from their employers, and 77% said a lower salary would be acceptable in exchange for this type of flexibility.
- Paid leave — A majority of the employees polled (70%) said paid leave is an important factor that contributes to whether they accept a job offer.
The bottom line: If benefits are lacking, offering a competitive salary might not be enough to snag a desirable candidate.
What you can do
Forbes notes that employers and employees are both facing uncertainty in 2023. To address that uncertainty and continuing labor shortages, Korn Ferry Senior Client Partner Tom McMullen told the Society for Human Resource Management (SHRM) that employers should focus on what they can do to keep their current employees.
McMullen recommends that employers consider:
- Making counteroffers to persuade employees to stay
- Promoting high-potential employees
- Providing signing, retention and referral bonuses
The SHRM article also offered a few other ways to address talent shortages:
- Allocate compensation budgets to hard-to-fill (and hard-to-retain) roles, which may include frontline hourly positions.
- Give hiring managers more authority to go high on compensation when making a job offer.
- Conduct salary surveys and market pricing analysis for roles in local areas where organizations just aren’t connecting with the talent they need.
Employee experience matters, too
The COVID-19 pandemic, the Great Resignation and inflation have led to a “reset in expectations as employee needs rapidly evolve,” said Steve Knox, Ceridian’s VP of Global Talent Acquisition. His advice is to focus on employee experience, which includes the way people are paid and how they work. Addressing these factors can set employers apart from their competition, he notes.
So, while increasing wages is certainly a way to attract and retain talent, there are other factors that come into play. Taking a close look at how your organization stacks up can help put you in a better position to manage the economic and labor uncertainties 2023 may bring.
– Applied Systems, Inc