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Should employers be paying more to retain staff?
HR News |
20/02/2012
Business leaders face a very difficult task in the current economic climate; growing their organisations without significantly adding to costs. Uncertainty surrounding the ongoing eurozone crisis is causing difficulties for UK firms, and the negative growth recorded in the final quarter of 2011 has done little to boost optimism. Company directors appreciate the need to keep moving in the right direction to support the recovery, but they are also acutely aware of the need to avoid overstretching resources.
With manufacturing and services activity picking up in January, a double-dip recession looks slightly less likely than a few weeks ago. But businesses will remain on their guard until strong gross domestic product growth returns, and for many this means reduced budgets and increased efficiencies. But doing more with less is always difficult, whatever the scenario. The only way businesses can increase output without increasing spending is to raise productivity, and this means demanding more from an already overstretched workforce.
UK employees have been put under significant pressure over the last few years. They are aware of the need to help their employer negotiate difficult economic times, but in many cases, are faced with greater responsibility and heftier workloads with little additional reward. From an employee morale perspective, this is a dangerous situation. Expecting more from individuals, and failing to reward them with promotions, higher pay and enhanced benefits is very risky. If workers feel as if they deserve more from their employer, and are able to find a better deal elsewhere, the chances are they will be off.
The UK's rising unemployment figures are, for the vast majority, enough to prevent people leaving jobs speculatively, with the fear of long-term joblessness keeping many workers in roles they would prefer to leave. And with the number of people out of work in the UK rising to 2.68 million in the three months to November, there are few signs of this changing as yet. But this is no excuse for complacency on behalf of employers. Just because fewer companies and organisations are hiring, it does not mean there are no jobs available. In fact, demand for talented employees prevails regardless of the economic environment.
Even during the deepest downturns, many companies look to expand, realising they can steal market share away from their rivals if they are bold and brave enough. New companies are set up and grow quickly to fill gaps in the market left by those that have failed. Consequently, skilled and experienced workers - those who can add value to organisations - are always able to better themselves if they cast a wide enough net. And this means the loss of skills and expertise from their previous employers, something which can have a direct impact on the bottom line.
Particularly with companies attempting to increase output at a greater rate than they up spending, productive employees are a vital asset. The more work employees can get through, the greater the business output, and this is reflected on the bottom line. Ideally companies want to have skilled and experienced workers operating at maximum capacity, not untrained novices slowly learning their job. Irrespective of the recruitment and training costs associated with new hires, most new entrants into an organisation are unable to get through as much work as their colleagues.
So the question for employers and HR staff is, how far can they stretch to keep talented individuals engaged, motivated and happy in their jobs. If they ask for more money in the annual review, is it possible to meet their request? If increasing the salary of one worker means paying everybody else more, the costs may outweigh the benefits. But individual rewards, made on an ad hoc basis according to performance, are surely worth the extra expenditure.
Deciding where to draw the line is the most difficult aspect of employee retention. It is possible to pay employees more than their market value, but even this does not guarantee their long term loyalty. Nor does it ensure they keep working at an optimum level. For this reason, performance-related pay appeals to many employers, as individuals receive a salary based upon their own achievements over the week, month or quarter. So if output is up, the company pays more out in wages. Greater productivity should translate into increased profits, which makes it easier for employers to justify pay awards.
Business leaders want, and need to keep hold of their key employees. But they also, particularly at present, need to keep an eye firmly on the books. While it may be regrettable to see talented staff go elsewhere, businesses cannot be held to ransom in a tough economic climate. But each case has to be judged on its merits, as and when the situation arises. Companies may have policies for employee pay and benefits, but sometimes being a little more flexible delivers greater overall benefit in the end.
Posted by Jon Aspinell
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