It’s vital that you are on the ball when it comes to salaries, you should benchmark against your competitors and the market rates regularly and be aware of your employees’ and potential candidates’ worth.
A hike in interest rates and labour shortages along with many other factors are making the battle for talent a fierce one. With this in mind, businesses need to offer the best possible remuneration packages to try and manage expectations when looking to attract talented professionals to your business.
As we navigate through the cost-of-living crisis, the inflation hike and the ‘Great Resignation’, concerns for both employees and employers around salaries, sustainability and growth becomes ever more apparent.
Latest official figures from the Office for National Statistics (ONS) show that average monthly pay across the economy increased by 4.7 percent in April to June 2022.
However, the real wage, which reflects the state of an employee’s pay after inflation has been accounted for, fell by three percent during the last quarter, data released by the ONS in August 2022 revealed.
Even though salaries continue to stay behind inflation, the current trends being seen across the UK are leaving employers having to make judgement calls on their salary ranges and budgets, according to Ben Grinsted, Recruitment Manager at Reed.
He said: “Payrolls are continuing to rise; candidates have been confident to make switches over the past nine months and have seen significant increases on their existing pay packages. This is in vast contrast to the start of the pandemic.
“There are so many jobs out there at the moment which means those looking for work are spoilt for choice - more options make it harder for employers to secure top talent.”
Navigating conversations around salary expectations
As an employer, there will be times when you must have conversations with potential employees around the subject of salaries. The tone and outcome of these conversations can vary, and often depends on factors such as business success, profits or losses, growth opportunities, market conditions, and cutbacks.
Ben states that employers need to be informed and aware of economic factors. He said: “Being informed on what the current market expectations are is extremely important. Gaining an understanding of the candidate’s expectation early on can ensure there is no misalignment at the offer stage, but ultimately, you must be prepared to negotiate."
In addition to knowing the market rates, employers should provide context and reasoning to their salary offering, whether it’s based on fixed salary bandings, market conditions, additional bonuses, or equal pay across the team. However, flexibility is key, and you should consider each request with an open mind.
During negotiations, try to understand the reasoning behind the salary request as there may be other benefits you could offer that meet that candidates’ needs. For example, if someone is requesting a higher salary to cover increasing travel costs, you could allow them to work remotely instead of raising their salary.
Understanding current market value for job roles
To be able to confidently navigate through the entire recruitment process, the first thing you need to ask yourself is: is what you pay competitive in today's jobs market?
If you pay below the market value, you put yourself at risk of losing valuable employees and being unable to attract the best talent to your business. On the other hand, while it may be tempting to pay way above the market value to attract the best professionals, it can be detrimental to your organisation’s bottom line and unsustainable in the long term.
Knowing the value of each role is crucial, so it’s important to be at least aware of what is considered a fair and reasonable salary. Having witnessed the drastic rise in salary demands within the jobs market, Ben believes employers need to fully understand the worth of the job being advertised before they can manage any expectations against the salary.
He added: “It’s essential to know the market value of your job roles. Without an understanding of where the market is at, sticking to what you were doing 12-to-18 months ago will not secure the talent you are targeting.
“In some situations, it may be more financially viable for businesses to develop existing talent, so if employees have the right cultural fit for your company, invest in them and make them feel rewarded for their hard work.”
To help you benchmark the salaries you are offering, download our 2022 salary guides.
Tips on negotiating salaries
Negotiating salaries can be straightforward if both parties’ expectations are aligned, but other times it can require careful thought and patience.
Often, a candidate will know their worth and according to Ben, it’s important that employers take the time to think long term when it comes to their negotiation strategy.
He said: “It’s about approaching conversations around salary with the right mindset. Being prepared to negotiate and producing a win-win solution I believe is key. But remember, salary is not necessarily everything. For some candidates, it’s not about a massive increase but the whole remuneration package.
“We know that finding quality talent is hard, hiring incredible people is hard, but you need to reinforce who you are, who your management teams are and how you can help their journey.
“Another thing to consider is that you’re setting the tone for how the business approaches conversations around compensation. If you are too aggressive or too rash, you run the risk of hindering any salary conversations further down the line.”
The importance of benefits packages
Since the Covid-19 pandemic, there’s been a huge shift in employees’ priorities, which has been reflected in the changes to benefits packages being offered. Alongside traditional benefits such as pension schemes and health care plans, many professionals are now expecting flexible working as standard, and placing more importance on learning and development opportunities and wellbeing initiatives. By making your benefits package competitive, you can increase how attractive your organisation is to potential candidates.
Ben believes that a strong benefits package shows just how much you value your people, increasing both the employee experience and employee value proposition within the workplace.
Ben said: “The compensation package can often make or break a negotiation. I think the biggest key element of any package, that will vary dependent upon the level of the candidate, is to have a long-term incentive plan (LTIP).
“Any such reward will see the candidates’ journey interlinked with the journey of the employer. Although the LTIP scheme needs to be realistic and achievable, this will help to maintain employee engagement, commitment and satisfaction.”
Salary expectations will always be difficult to manage. But having a transparent, fair and effective strategy will not only help you to retain your most valuable staff members, but it will also help attract high quality candidates too.
Are you looking for a talented professional to drive your business’ growth? Get in touch with one of our specialist recruiters now.