After a 12-month average of 246,000 new jobs and an unemployment rate that dropped to 5.6 percent in 2014, confidence is growing in the labor market and many companies plan to hire throughout 2015. With all of this positive news on the job front, employees might have expected to see upward movement on salaries and wages. However, most recent surveys and reports indicate employers are planning modest pay increases, comparable to what was awarded in 2014. In light of this, how will companies retain their best talent, when below-market salaries are one of the top reasons employees decide to leave?
According to Towers Watson commentary regarding their 2015 compensation survey, projected pay raises are flat and a bit disappointing as the average employee is barely keeping ahead of inflation. However, we realize that many companies are being conservative with pay, because they are still concerned about the stability of the economy and the labor market.
Despite this reality, the most recent Recruiter Sentiment Study conducted by MRINetwork, a subsidiary of CDI Corporation, found that although improved compensation and benefits are a leading factor for both permanent and contract employees considering changing jobs, the top reason that candidates leave is because of clear advancement opportunities elsewhere.
So what does this mean for employers?
Companies may be at greater risk of losing their top performers, but the wage issue can be minimized by providing upward mobility and career development scenarios that meet the varying needs of your blended workforce. For example, permanent employees are more likely to stay with organizations that offer career tracking, mentoring and training programs. This is largely because these programs raise the advancement potential to a more senior role, which not only connotes greater responsibility, but also higher pay, or at least the long-term potential to earn more. Project-based contingent workers are typically more focused on leveraging and improving their skills, expanding their client portfolio and gaining access to new technology platforms. Retention of contractors has more to do with continually providing opportunities to expand existing skillsets, and exposure to product or service innovation that will add more breadth to their level of expertise.
“The days of requiring employees to take on additional work without a pay increase, or providing some benefit to their career are behind us,” says Jody Rummel, vice president, human resources & operations for CDI Corporation. “Today’s workers want recognition for their contributions, and they expect to see a clear path for how added responsibilities will enable them to advance within the company, or at least benefit their long-term career growth.”
Ultimately the salary discussion has more to do with an employer’s culture of coaching, mentoring, training, recognition and evidence of career advancement, in addition to how well the organization communicates and sells these attributes, both internally and externally. "The goal should be more about creating a ‘best place to work’ environment that is highly desired by candidates in the marketplace," adds Rummel. "This is really what the future of recruitment and retention is all about."
Advancement opportunities, career-pathing and training will additionally become more important as Baby Boomers retire and Millennials become the majority in the workplace. This generation is especially focused on gaining experience that can be leveraged to make the next career step, which is why job changes after 2-3 years are more common and why contractors are ready to move on to the next project. Companies that provide the mentoring and training that Millennials crave are not only working toward retention of their brightest talent, they are grooming the future leaders of the organization.
Rummel provides the following tips for establishing and promoting career-pathing and mentorship programs:
- Brainstorm how your organization can develop these programs, if they don’t already exist. Consider how they can be leveraged to support various groups within your workforce and create an inclusive environment that takes into consideration aspects such as gender, race, temporary/contract team members and junior to mid-level management candidates on your permanent staff.
- Begin discussing internal mobility programs during the interviewing and onboarding process.
- Promote the programs through multiple internal and external channels to create stories about employee advancement and contractor projects within the company.
Although career growth is what’s most important to candidates, it doesn’t mean that companies can make wage increases a last thought. Salaries are going to have to come up to attract top performers. "However, no amount of money will make them stay in a role that appears to have no future or no long-term benefit to their career," concludes Rummel. "That’s where the power of career-pathing kicks in."
Recent CDI Analysis
“Today’s workers want recognition for their contributions, and they expect to see a clear path for how added responsibilities will enable them to advance within the company, or at least benefit their long-term career growth.”Jody Rummel
Vice President, Human Resources & Operations, CDI Corporation
Employment Situation (U.S.)
The labor market continued its positive growth trend in February. According to the U. S. Bureau of Labor Statistics, 295,000 jobs were added, above economists’ projections for 240,000 new jobs. The unemployment rate dropped to 5.5 percent.
A variety of industries experienced gains, including the professional and business services sector which grew by 51,000 positions. Most of these new jobs were in the technical consulting services, computer systems design and architectural engineering fields.
Industries that saw little change during the month of February include information, financial activities, wholesale trade and government. The mining sector saw a slight loss in its workforce.
According to the report, average hourly earnings improved by 3 cents to the current average of $24.78. Despite this only slight improvement, the U.S. dollar reached its highest value in 11.5 years against a number of currencies, reported Reuters. This general positive growth could inspire the Federal Reserve to hike rates in June, explained the source.
The full Bureau of Labor Statistics report can be downloaded by
Employment Situation (Canada)
According to Statistics Canada, employment remained largely unchanged for the month of February, although the unemployment rate rose by .2 per cent to 6.8 per cent as more people submitted jobless claims. A net 1,000 jobs were lost but this was much lower than the 5,000 – 20,0000 that economists had projected.
The industries that experienced positive growth included construction, which added 16,000 jobs, and educational services, which saw a hiring increase of 15,000. The manufacturing sector declined by 20,000 positions in February, while the natural resources field shrank by 17,000, mostly in the mining and oil and gas extraction sector. The information, culture and recreation sector dropped by 12,000.
Full-time workers increased by 34,000, while part-time employment dropped by 34,900. Public service employment added 24,300 jobs, yet 29,000 jobs were lost in the private sector.
Avery Shenfeld, chief economist at CIBC World Markets told the Financial Post, “For once at least, the Canadian jobs data managed to not be a shocker, conveying the early stages of the headwinds to the economy from weaker oil prices.”
Canadian ES Report:
Labour Force Survey, February 2015