How employers can drive down employee turnover in 2022
As the UK continues to recover from the impact of the pandemic, employers find themselves in a competitive labour market with a matrix of challenges to tackle. HR and Reward Management Consultancy Paydata has published the results of its spring 2022 UK Reward Management Survey, which highlights the challenges employers currently face when it comes to balancing rising inflation and costs with the cost of living crisis facing employees.
Overcome recruitment and retention challenges
This time last year, the pandemic meant that Paydata captured the lowest levels of recruitment and retention difficulties since the 2008 economic recession; respondents are now reporting a surge in recruitment and retention challenges that they have experienced over the last six months and this is set to continue through 2022. In addition, 71 per cent of respondents are having to offer new recruits salaries that conflict with those paid to existing employees in order to attract the right talent and skills.
Keep pace with inflation
The buoyant labour market is particularly challenging given the backdrop of pay. Pay has been constrained for years, just tracking above inflation, as Paydata has consistently reported two per cent pay rises. This year, we are seeing a return to the three per cent pay rises that had just started to become more popular before the pandemic, however this now falls below official levels of inflation which are set to rise.
Upwards pressure on pay awards
The demands facing employers when it comes to pay, and balancing this with affordability, causes huge pressure on pay frameworks. The most common pay review for 2022 is three per cent, the number of respondents awarding this increase nearly doubled since last spring from 22 per cent to 42 per cent. The one per cent of respondents awarding four and five per cent increases one year ago has significantly increased to 28 per cent and 15 per cent respectively.
Reduced operation of pay freezes
Just one respondent reported plans to freeze pay in 2022, with their use declining since the autumn 2020 survey when 24 per cent operated a pay freeze. However, employers increasingly face the challenge of balancing constrained wider economic growth and affordability with fair pay that enables employees to access meaningful pay awards.
The focus on total reward
Employers are having to be more innovative with budgets and bolster their approach to total reward. 22 per cent of respondents acknowledged that they have improved their benefits provision to mitigate constrained pay reviews. Underlining the wider value they offer when it comes to supporting issues that employees care about is an opportunity for employers to further reduce the pressure on pay frameworks in the current economic climate. An organisation’s value proposition – being its approach to diversity and inclusion, its culture of flexible working or its commitment to sustainability – needs to encompass what they stand for in terms of their values and wider purpose to retain and attract talent.
Consider the robustness of pay and reward frameworks
Employers are increasingly focusing on whether their current approach to pay and reward is fit for purpose in the competitive landscape and war for talent. 75 per cent of respondents intend to review their reward framework to ensure that it is robust enough to deliver true value to employees. 84 per cent will benchmark pay to remain competitive in the market and 81 per cent will run employee opinion surveys to understand what truly matters to staff. These targeted actions alongside a greater focus on how to support the individual are all intended to drive down employee turnover throughout 2022.