It has never been so crucial to have people with the right skills and experience to combat the tough trading environment affecting all businesses. Employers are currently facing a recruitment crisis with key middle management roles relentlessly difficult to fill. The squeeze on companies is profound & I want to share some of my reasons for this with you.
Inflation & Unrealistic Salary Expectations.
Inflation – The current inflation rate in the UK as of September 2022 sits at 10.1% an increase of over 8% since 2020 and is at its fastest rate in 40 years according to BBC news. The reality is that, this is much higher.
So, are wages keeping up with inflation?
The short answer is no. According to the BBC, average wages, not including bonuses, rose by 5.4% in the three months to August of this year and including Bonus culminated in 6% - this is the strongest growth in regular pay seen outside of the COVID – 19 pandemic. Overall, once inflation is considered, average pay fell by 2.9%.
Unions stipulate, wages should reflect the cost of living. However, the government says this could push inflation even higher because companies could increase prices to cover higher wages. It is a double-edged sword, I tend to agree with the latter
What are employees looking for in a Salary/Package vs. The Reality
Surveys from wtwco show that 96% of companies globally increased salaries this year compared to 63% in 2020 to rates that haven’t been seen in nearly 20 years. Most employees (91%) will also receive a pay rise next year as inflation and skills shortage continue to bite.
The annual pay increase for people sticking around at their company, on average is 2 – 3% barely enough to offset the effects of inflation in a standard year let alone this year.
A new poll claims that growing economic uncertainty has forced employees to reprioritise what they want from potential new employers. People are increasingly interested in basics - in ranking order;
· Job security
· A safe/comfortable workplace
· Salary and benefits
· A better workplace culture.
Employees when embarking on a job search need to understand it isn’t all about the salary. You should be considering everything that is on offer.
Pay increases should be measured in terms of total compensation, including benefits, stock options and bonus. Career development should still be number 1 priority – requesting a higher salary and benefits package is short-sighted. Career development must be paramount, otherwise you will come unstuck as a highly paid failure.
What uplift in package should you realistically be looking at?
Due to the cost of living of course when looking for a new job now compared to a year ago expectations are going to be higher.
ECW macro data of the past 18 months shows 38% of candidates expect/demand a 25 – 30% increase on Basic Salary siting cost of living as the drive – which is frankly ludicrous.
Salary increases, depend on a multitude of factors such as industry, level of seniority, company, location and if you are currently underpaid or overpaid. 5%-15% package uplift is average across the market dependant on the above factors.
5% increase is simply not enough to cover inflation in 2022 so you do need to be aim higher. We recommend 7% as a base measure – any less than that and you are effectively taking a pay cut.
When switching jobs, you should aim to negotiate for at least a 10% pay increase. But asking for nearly 25 – 30% higher than you are on now – is preposterous and will have medium term repercussions detailed below.
The ridiculous inflation in salary expectations is going to cause a major issue
Due to the package expectations of candidates and the number of vacant on the market (LinkedIn data states – c.2000 National Account Manager roles currently live in the UK) employers are PAYING over the odds to hire, which not only will contribute to further inflation but will mean that when people do fail in a business at a higher salary rate, they think they are worth that level when looking for a new job again which simply is not the case.
It isn’t only people currently employed that are causing this issue new research of almost 4,000 UK students on expected graduates salary expectations have risen 9% since January 2022 – that is just 10 months with a 9% salary expectation increase – Gen Z Generation are adding to the problem.
So, what happens now….
The problem in the market is not due to a lack of skills or of people. It is due to prioritising security & wild salary grabbing. An increase of 25 – 30% just isn’t justified in any profession and employers should not be paying it.
When looking for a new job don’t just look at a salary consider the reasons you are looking and the whole package on offer – you are only hindering yourself in the long run once the rising cost of living slows. This will become an employer’s market, you will struggle to find an opportunity that matches previous pay scales 12-24 months down the line.
Focus on development ops. The businesses that offer that will win in recession and you will be better off. Remember the first cost cut businesses remove in economic adversity is, training, followed by people… especially overpaid ones.
The reality is the opportunity to develop your career should always trump pay.