Salary Expectations Put Businesses under Pressure   14 Feb 2012

Salary expectations are a growing source of tension between businesses and employees, according to Hudson’s Salary and Employment Insights 2012 series of reports1.

“Employers are under pressure to simultaneously improve the quality of their hires and control the cost of these hires – they need valuable employees to take the business forward, but not at any cost,” says Roman Rogers, Executive General Manager, Hudson New Zealand.

“Facing the tension of trying to do more with less is especially difficult when salary is the top driver for 36% of employees, with many believing that it will be ‘easy’ or ‘very easy’ to find a similar job with comparable pay and conditions.”

Nearly seven out of 10 employees are considering moving jobs in 2012, while two-thirds of employers say they are worried about losing their existing high performers.

Across the board, nearly 28% of employers intend to increase permanent staff levels. Candidates with business acumen, a cross-functional knowledge and an ability to contribute to the organisation’s overall strategic direction are highly sought-after across all sectors. This is particularly evident as key business functions, including IT and finance, become a key driver of business performance.

Almost half of hiring managers report the salary expectations of preferred candidates exceed their budget, with 43% increasing their budget to secure the best candidate, with the remaining employers settling for their second-choice. Furthermore, about six out of ten employees feel that they deserve a pay rise in 2012.

“Salaries are increasing, particularly for talented mid to senior hires,” says Roman Rogers, Executive General Manager, Hudson New Zealand. “In challenging times, businesses can’t afford to compromise on investing in their people, but at the same time they face a dilemma with corporate growth rates lagging employees’ heightened salary expectations. We suggest they fine-tune their recruitment strategies to find and retain high performers who can make the biggest difference to the bottom line.”

The skills shortage is intensifying competition for the most talented candidates – almost half (46%) of employers said it was harder to secure the right candidates in 2011, particularly for senior strategic and managerial roles.

“In order for managers to cope with the increasing salary pressure being placed on them, they need to understand the difference between ‘cost’ and ‘value’ when choosing their teams and allocating their salaries,” says Rogers.

To help organisations achieve their aim of addressing the gap between rising salaries and slowing profit growth, Hudson recommends companies adjust their approach to recruiting to ensure they get the best performers.

Firstly, organisations need to identify high achievers. To do this, they need to broaden their approach from traditional methods of selecting new hires that focus on technical qualifications and experience, Rogers said. Hudson Difference™ helps organisations identify the most suitable fit by including assessments that measure candidates’ motivational and behavioural attributes, which have been shown to be more accurate indicators of performance. Only 32% of companies assess candidates’ behavioural, personality and intelligence attributes, while only 6% use assessments that test for cultural fit. Current approaches have been costly for a number of employers who have reported that 44% of employees were described as ‘not good’ in 2011. A cost-driven approach and corner-cutting has led to mistakes, and about a third of organisations said that in hindsight they would have done more to assess candidates’ abilities to ensure the value of their investment was realised.

Secondly, organisations need to understand their priorities in terms of the harder-to-fill strategic roles that help take an organisation forward, and the ‘critical’ and ‘core’ roles that keep the organisation functioning on a day-to-day basis.

“Many businesses need to review their recruitment function – from the brief they give to their recruitment consultants, through to interview and on-boarding procedures. Much recruitment is cost-driven and much is compromised by time constraints, yet poor hires can cause untold damage in terms of culture, morale, productivity and profits.”
“A more liquid workforce is both a threat and an opportunity for employers,” says Rogers. “This is a great time for organisations to evolve their practices to extract the most value from their teams.

“There’s also an opportunity for smart employers to think beyond just the salary and offer attractive, tailored remuneration packages to individual employees. Salary is important, but it’s not everything. Sometimes overpaying can be as risky as underpaying – no organisation wants to be represented by employees who are driven solely by salary.”

(Hudson Report)

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