Payscale’s Compensation Best Practices Report found that one third of companies don’t regularly perform market and compensation analysis, putting them at a disadvantage for hiring and retaining employees.
It’s a Candidate-Driven Market
The recession is over, and talent no longer needs to be overworked and underpaid to hold a job. With 73% of employers expecting their financial situation to improve in 2015, and 50% of companies expecting to increase staff, there is a lot of competition for hiring because talent has so many choices about where to work.
This has caused a turn toward a candidate-driven market where there are more jobs than there are qualified candidates. In fact, half of employers report a lack of qualified applicants for their open positions.
This creates a big case for sourcing – putting more opportunities in front of top talent – but also causes another problem for employers: employee retention. 57% of employers are worried about keeping their employees because of all the opportunities available to them.
Compensation Can Help you Rise Above the Competition
With all this competition for your candidates and employees, you have to stand out from other employers – and one of the ways you can stand out is through competitive compensation.
The top reason employees leave an organization is compensation (21% leave for that reason, 21% for personal reasons, and 18% for advancement opportunities), and 89% of employers are planning to award pay increases in 2015, so anyone not increasing compensation this year will really struggle to hire and retain talent.
Despite the high number of employers increasing compensation, only 10% perform market and compensation analysis semi-annually, and only 43% perform the analysis once per year – so the majority of employers giving raises are uninformed about what their employees and candidates are actually worth on the open market.
The Disconnect in Compensation
Payscale reports that 85% of companies who plan to give raises in 2015 expect the increase to be between 0-5% – but BountyJobs data has shown that average agency fees are up 6%. What we’ve found is that, while agency fees as a percentage were flat, the dollar amounts were increasing because salaries were increasing.
So, according to our data, at least 85% of employers are not competitive in terms of compensation if they’re only increasing up to 5% – which would account for the lack of qualified candidates employers are complaining about.
Top talent has a choice in where they work, and they will flock to the companies with competitive compensation.
What This Means if You Work with Direct Hire Agencies
If you work with direct hire agencies, your compensation practices can also impact which agencies will work with you, and which candidates they will send you. While 53% of recruiters say that playing matchmaker is the best part of their job, they are still in business to make money.
Given two reqs that are a great fit for a candidate, both the recruiter and the candidate would probably lean toward to opportunity with the higher compensation.
So, if you want to hire great talent this year and retain your existing employees, make sure you’re taking your compensation plan seriously.