After over 25 years of working with floor covering, furniture and interiors manufacturers and dealers to fill their openings with top talent, we so often hear from candidates, “It’s not about the money” as there are certainly other major factors that can, and do, heavily weigh in in today’s market.
However, that typically ends up not being the case when we get to the offer stage. Money talks. It always has, and it always will. In a prior article in 2023, we reported the top five reasons that employees are seeking a career transition. No surprise, then, that compensation is ranked No. 1, followed by career advancement opportunity, more schedule flexibility, purpose of work, and diversity and inclusion.
While compensation is not the only factor in making a career change, candidates are typically unwilling to take less. In fact, many often will need roughly 20% more to consider a move if they are currently employed. They will sometimes “take one step back to get two steps forward,” but that path to get two steps forward needs to be outlined with clearly defined key performance indicators (KPIs), with incentives and progress tied to those KPIs.
So, as an employer, how do you determine what you need to pay to be competitive and fair to all while not overpaying? Employers generally determine salaries based on five criteria:
- The job’s responsibilities
- What competitors are paying
- How valuable the job is to the organization and what the projected ROI is likely to be
- How employees are paid in similar roles based on their pay structure
- Budgets weighed with organizational needs
The answer for employers and employees alike is to do your research. Specifically, research competitors and similar businesses in comparable geographical markets. Those in markets outside of yours will be the most likely to share. You may also want to seek compensation surveys done by third-party researchers.
There are other useful resources available. While not industry specific, some of the online tools such as Glassdoor, Indeed, salary.com and the Bureau of Labor Statistics can provide some value. It’s also a good idea to speak with industry recruiters or reach out to former employees of competitors.
Bear in mind that one’s salary is affected by other components of your overall offerings.These may include:
- Incentive packages. Typically, the higher the risk, the higher the reward. Have more than one structure option based on the employee’s priorities regarding security vs. wanting to earn the highest incentive that they can. For sales and business development positions, do not cap their commission.
- Employee benefits such as PTO and paid holidays
- Flexibility in work hours and location
- Commitment to mental well-being and physical fitness
- Stocks. One of the first additional forms of added compensation to consider is equity
- Signing bonus and/or retention bonus
- Stipends for relocation or tuition reimbursement
- Professional development tools
The inability to attract top talent is so often due to not offering competitive compensation. This is not only costly but may also result in: unmotivated employees; lack of satisfaction/ engagement; reduced employee loyalty; and reduced productivity and, by extension, reduced profitability. Even worse, not offering competitive compensation could also result in attrition. According to research conducted by the Society of Human Resource Management (SHRM), the average reported annual employee turnover rate to be around 19%. For a business employing 200 workers, that’s 38 departures every year.
In compensation terms, the real cost of employee turnover can be upwards of 30% and cost up to five times the position’s annual compensation, depending on the type of role, location etc. That 200-employee business would spend $638,324 in avoidable costs.
Additional SHRM research suggests replacement costs can be as high as 50%-60% of an individual’s salary with overall costs ranging anywhere from 90%-200%. Yearly turnover rates, according to SHRM, are calculated by taking the number of separations during any given year and dividing that number by the average number of employees during that same year.
A competitive pay and benefits package does influence an employee’s overall job satisfaction. Workers who feel they’re being paid fairly and are a value to the company are more likely to stay motivated and go the extra mile to help the company achieve its goals. Competitive compensation shows that you care about your employee and are invested in their success. Your people are an asset, not an expense. Paying a fair compensation will come back to you tenfold.
Marilyn McSweeney is president of The McSweeney Group, a company that specializes in helping clients with their hiring and retention needs. She has written extensively on recruitment, hiring and retention.
The post Hiring: What today’s workers want appeared first on Floor Covering News.