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How to retain talent during cost of living crisis

Employment Hero’s Ollie Russell reflects on ways in which businesses can approach flexibility and pay, as employers and employees alike continue to feel the pressure of the Cost of Living Crisis.

The post-pandemic worker shortage does not appear to be going anywhere.

In November 2022, 13.3% of businesses surveyed by the Office for National Statistics reported experiencing a shortage of workers. With many people deciding to change careers or exit the workforce entirely, experienced employees who you can trust are more valuable than ever.

And yet these same employees are finding it very tough due to rising costs. This kind of pressure could make it far easier for a competitor to “poach” your best employees – loyalty only stretches so far when you’re struggling to make ends meet.

Here are three strategies you can put in place to help retain your best talent now.

If you can, pay them more
It’s obvious, but the best way to retain someone who might be tempted by a higher offer elsewhere is to match that higher offer, possibly before the new offer is even made.

If someone is mission critical to your business, pay them a salary that recognises that.

After all, if an employee comes to you with a higher offer from someone else, only to have you immediately match it, they will wonder why you didn’t value them earlier.

Most businesses will not be able to increase employee pay to match the very high levels of inflation in the last year, but some level of increase will help.

But a pay-rise is not the only way to increase compensation for an employee you think deserves it. A one-off cost of living payment or bonus won’t eat into your ongoing costs in the same way, but will let your employee know that you value them and want to help them through this difficult period.

If you can’t, embrace flexibility
Not all businesses will be able to give big bonuses or pay-rises to their best employees. But there are other ways you can help that don’t involve a pay-rise.

One example is by buying back any annual leave they receive over the statutory amount. This gets a liability off your books while providing them with some extra cash – if they need it. This should only be done if your employee actually wants to sell some of their leave.

Another crucial retention strategy is embracing flexibility in how the workplace operates. British workers love working from outside of the office. Our report* found that 88% of office workers wanted to work remotely at least one day a week, and many were willing to leave jobs over it – 33% of 25-34 year olds said they would likely quit if forced into the office full-time.

Embracing flexibility doesn’t just mean allowing work from home. It could also involve you purchasing some equipment to make that work from home more comfortable and efficient, or subsidising public transport fares for trips to the office if you are insisting on them.

Roll out perks
There are many extras you can provide an employee alongside their salary – and some of it doesn’t have to cost you anything.

Salary sacrifice schemes for cars, bikes or gym memberships and the like see your employees use their pre-tax income to pay for the benefit, netting them huge savings without necessarily costing you anything. You may have to take on some liability, but not a particularly large one.

These perks are great at making a job sticky. Quitting your job is hard enough – quitting your job and also losing your electric car is even harder. Low benefit-in-kind rates for clean commuting are sticking around until at least 2028, despite a slight rise – which means these deals are very good for your employee as well as you.

Other perks could include a phone contract or extra annual leave, both measures which make jobs very sticky. There is also a lot of evidence to show that workers who take a decent amount of time off are actually more productive – so you could be helping yourself by helping them here.

These strategies all differ somewhat, but they really boil down to one thing: making sure your best talent knows you value them, and understanding if they are going through a tough time. If you get that right, they should stick around.

*Remote Working report from Employment Hero

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