Even amid what were record high unemployment rates across the world as a result of the COVID-19 pandemic, recruiters contend that talent scarcity remains a major challenge for businesses. According to the 2021 Talent Trends Report released by Randstad Sourceright earlier this year, 40 percent of human capital professionals report that talent scarcity has negatively impacted their organization – the highest total in the past five years.
In today’s highly competitive talent landscape, you need every edge you can get to recruit and hire top talent. And if you’re looking to hire in the second half of this year, get ready to dive deep into that wallet because top talent has become more expensive than ever.
How Much Will Top Talent Cost?
Despite the uncertain economic outlook for the first quarter of 2021, some businesses purportedly increased salaries by up to 3.5% for high-demand roles in order to remain competitive in the race for top talent, according to a recent salary report by Randstad US.
Data from the Guide suggest that some of the largest salary increases are occurring for roles like warehouse and logistics managers in response to a rise in e-commerce activity. Salaries for warehouse managers, for example, should increase 3.5% to as much as $43.21 an hour in order to remain competitive. Logistics managers will need an increase of up to 3.5%, to $45.95 per hour.
The Guide also notes consistent increases in the competitive pay rate for technology and skilled roles nationwide.
“Despite labor market challenges associated with the pandemic, our data show that many employers across a number of industries are still in desperate need of workers,” said Karen Fichuk, CEO of Randstad North America. “That demand is driving an uptick in compensation and benefits for these roles, and employers will need to meet these expectations to secure talent in a tightening labor market.”
The growth in salaries is good news for job seekers hoping to switch careers amid the pandemic, especially as many companies have placed an emphasis on skilling initiatives. However, it also means that employers will likely compete for key new hires across a number of industries.
Other positions in fields like online sales and marketing are also experiencing an increase in demand and will likely see salary increases in 2021. E-commerce business analysts and marketing managers, for example, are likely to see a 0.5 percent increase in salaries, hitting highs of up to $107,107 and $131,130, respectively. This is largely due to the recent rise in e-commerce during COVID-19, which has accelerated a shift away from brick-and-mortar to digital shopping by up to five years.
These findings are from the Randstad US Salary Guide, an annual report that includes pay rates for a variety of job titles or positions within accounting and finance, engineering, clinical and non-clinical healthcare, human resources, information technology, life sciences, manufacturing and logistics and office and administration. The benchmark data and insights are meant to be used by companies to measure their compensation against the broader market.
The Cost of Losing Out
It pays to pay more. If you’re leery of increasing compensation packages, consider the costs of losing out on top performers.
While the exact costs of losing an employee vary, there’s no question it’s something employers need to manage. Some studies predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $60,000 a year, that’s $30,000 to $45,000 in recruiting and training expenses.
Turnover as a result of either poaching or hiring misalignments seems to vary by wage and role of employee. For example, a CAP study found average costs to replace an employee include the following:
16 percent of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328.
20 percent of annual salary for mid-range positions (earning $30,000 to $50,000 a year). For example, the cost to replace a $40k manager would be $8,000.
Up to 213 percent of annual salary for highly-educated executive positions. For example, the cost to replace a $100k senior-level management role is $213,000.
In other studies, Employee Benefit News (EBN) reports that it costs employers 33% of a worker’s annual salary to hire a replacement if that worker leaves. In dollar figures, the replacement cost is $15,000 per person for an employee earning a median salary of $45,000 a year, according to the Work Institute’s 2017 Retention Report. The study of 34,000 respondents concluded that 75% of the causes of employee turnover are preventable.
You also need to couple the monetary costs of losing talent with the time it costs you to fill positions. The Society of Human Resource Management (SHRM) has found that the average time-to-fill a position can be anywhere from 36 to 40 days. And according to LinkedIn, only 30 percent of companies are able to fill a vacant role within 30 days. The other 70 percent of companies take anywhere between 1 – 4 months to process a new hire.
“When you can’t find people to fill your open positions, it’s not a labor shortage. That’s a shortage of people who want to work for too little pay.”
-Liz Ryan, Founder & CEO, Human Workplace
It’s bad business to hold job openings vacant while you wait for the perfect job-seeker to show up.
“For an entry-level job, it shouldn’t take longer than a month to make a new hire. For an executive job, it still shouldn’t take more than a quarter. We delay in our hiring processes because we think we can. We think there won’t be repercussions or ill effects to our business when we drag our feet and delay making a hiring decision.”
In the long run, it ends up being costly NOT to act fast and NOT to offer the most competitive package possible when you find the right fit — so let’s talk about how you can make sure that money and time is well spent.
With the race for talent heating up and the price for top talent continuing to rise, it’s no longer sufficient to assess candidates or make personnel changes based only on skills, knowledge, and experiences. You need a recruitment strategy that protects both your time and financial investment in filling the role.
“Resumes, LinkedIn, and educational backgrounds only tell some of the story. Besides being self reported, they are limited to only showing past experiences — whereas recruiting ground in psychometrics is concerned with psychological measurement, and can more easily reveal a person’s fuller potential when it comes to situational behavior, actions, results, communication, and motivations — now and in the future,” says Humantelligence CEO Juan Betancourt.
A candidate’s psychometric profile can give you a multi-dimensional snapshot of a person, rather than a bulleted list of facts. It includes comprehensive data on a candidate’s critical behaviors, motivators, and work styles, as well as sought-after skills like communication, creativity and adaptability. When you assess this kind of emotional intelligence right alongside cognitive abilities, you’ll find yourself removing unconscious biases and engaging in a more inclusive approach to evaluating candidates — all of which can help you predict greater success in the role.
As an executive search consultant and professional recruiter, Betancourt reminds recruiters, “you have to go deeper with culture fit when evaluating candidates — by measuring the behaviors, motivators, and work energizers of potential employees. Culture fit does not only mean hiring who you or the hiring manager like but rather being open to hiring people unlike you or any others in your organization. For each role, region/geo, and industry, the needs will be different and there is no out-of-the-box formula. Ultimately, you can leverage these insights to take the guesswork out of candidate fit and predictive success.”
Hire individuals who share or have demonstrated the values you have identified as paramount, believe in the vision, and are excited about the work the team is doing. Avoid recruiting cookie-cutter replicas of your current employees and rather hire for culture adds and gap fillers — those are candidates who will enhance culture, as well as bring unique and valuable experiences and diversity of thought to the team. That’s where you’ll make the most of your investment.
By using a psychometric-based interview guide during your hiring process, you can both increase the confidence of your hiring recommendations and accelerate your time-to-hire — high priorities when you need to justify the rising costs of talent and the expense of watching your pipeline slow to a trickle.
If you’re interested in learning how to leverage psychometrics to optimize your recruitment strategy, we’d love talk to you.