You Need More Than Just Pay Raises To Win The War For Talent

79% of currently employed workers believe they can make better money elsewhere. Can they?

We live in a time plagued by shortages and rising prices. And perhaps the one thing that’s the hardest to find is people. I’d wager that just about every organization in the country—business, non-profit or even government agency—is struggling to fill open positions. With a near-record number of job openings, every qualified candidate likely has multiple offers from other organizations, maybe even from your competitor.

The overall strength of the market right now—with more job openings than available workers—has also made job seekers much more selective, while aggressive hiring by Amazon, gig companies, and other national employers with wide name recognition has created more competition for workers in many local markets.

That’s why more and more companies are increasingly offering more money to candidates to try to lure them into the fold. But this strategy comes with a catch: your existing employees might suddenly feel underpaid and unappreciated.

More than two-thirds (68%) of employed workers say that they plan to leave their current job in the next 12 months, according to Joblist’s 2022 Trends Job Market Report survey of 2,800 job seekers, since 79% of employed job seekers believe that they can make more money by switching jobs than staying put in their current position.

Worse, the more employers hand out pay increases, the more employees begin to look for other jobs seeking even higher pay. It’s a vicious cycle.

“There are broad expectations that higher pay is out there,” says Kevin Harrington, CEO of Joblist. “And they’re probably right given market conditions.”

I asked Harrington to share his insight into the evolving job market and how employers might need to change their tactics to compete in the War for Talent.

Seeking pay increases through job switching

While there has been plenty of media attention focused on the so-called Great Resignation or Great Reshuffle, there has been perhaps less focus on the fact that people are increasingly looking for new jobs as a way to get a raise.

“Job switching is often the best way to achieve a meaningful increase in pay,” says Harrington. For example, in the survey his company conducted, they found that 58% of employees who got raises last year received pay increases of only 5% or less. By contrast, by switching to a new job, employees could grow their pay by 10% to 20% or even more.

Harrington says there are numerous reasons why wages within an organization tend to move more slowly than the market overall. For instance, he points to the fact that most performance reviews and pay evaluations often happen once or twice per year within most companies. “Hiring and personnel budgets are also often set on a similar yearly cycle,” he says. “And in collectively bargained situations—like union contracts—the feedback period could be even longer, taking multiple years to adjust rates.”

The result is that when the labor market experiences rapid change like it has during the Covid-19 pandemic, “employers are not likely to adjust the pay of their existing employees as quickly as the market moves for new hires,” says Harrington.

When pay raises fall short

Even when companies adjust on the fly and offer existing employees raises, that strategy can backfire. According to the Joblist survey, 72% of respondents who received a raise from their employer still believed they could make more money elsewhere. In a cruel twist of irony, handing out raises might even lead to more turnover.

Put another way, if employers want to retain and attract talent, they need to look beyond raises as a solution since pay is only part of the equation. “While increasing pay is an important retention strategy,” says Harrington, “it’s likely only a short-term fix.”

According to the Joblist survey, most people quit their job for other reasons, including a toxic workplace culture (30%) or bad management (28%). Meanwhile, 49% of the survey respondents believe that their current employer does not care about their wellbeing, 44% feel mistreated by their boss and 73% do not see an opportunity for growth or skill development at work.

“To improve retention and retain talent long-term,” says Harrington, “workers are demanding more from their employers. It’s crucial to provide positive culture, management, career development, work-life balance and overall wellness opportunities for employees.”

Making time to listen and learn

No matter how employers might adapt in ways to keep employees from leaving, the hot labor market means you might not be able to keep them all, no matter what kind of raise you tempt them with.

That’s why it’s critical that employers listen to and learn from departing employees—a “post-mortem,” if you will. That’s especially true since the more workers leave a company, the harder it can become to recruit and train new employees. This can quickly spiral downhill.

Focusing on employee retention is especially critical for business owners right now, says Harrington. “They should try to understand why these employees are leaving and whether there is anything that can be done to limit turnover moving forward,” says Harrington. “If employees are leaving primarily due to pay, options are relatively straightforward—either increase pay to be more competitive with the market, or if that’s not feasible, be transparent with current employees and try to provide other benefits to offset pay concerns.”

It’s just as critical for employers to do their homework when it comes to recruiting replacements who want to join the team for reasons that go beyond the number of dollar signs on their paycheck.

The grass isn’t always greener

It’s also important for employees to consider more than just a salary bump when it comes to deciding to move on to another job.

“Most jobs come with tradeoffs,” says Harrington. “Before switching jobs, employees should weigh the pros and cons of their current job across several dimensions, including the people, pay, benefits, schedule, work-life balance, job security and career advancement opportunities. Depending on your priorities, it’s entirely reasonable to stay at a company for lower pay if it provides other advantages that are more meaningful to you.”

While employers use the job interview process to assess the fit of a potential candidate, employees should also use interviews to their benefit by evaluating the company, its people and their fit there. “You may realize during this process that certain factors are more important to you than pay,” says Harrington. “And that’s okay.”

While the War for Talent continues to rage, let’s all recognize that there’s more to keeping employees happy than simply handing out bigger paychecks alone.