The skills shortage is biting fast. Employers are already experiencing exasperated increases in costs to find and retain personnel. All the measures from respected bodies and national government indicators are showing it will only get worse….
War for Talent
In a very short space of time, we have seen an incredible increase in demand for skilled employees, alongside an equally disturbing drop in available and appropriately skilled people to employ. Australian workers are less likely to move interstate for work now due to the surplus of infrastructure projects nationally competing for the same skills, as well as COVID related restrictions and concerns.
Businesses large and small are facing the challenge to adequately resource their operational teams, as they equally struggle to resource their internal teams, such as HR and Recruitment, in order to meet the sharply rising demands. This creates huge commercial impacts to a business’s profitability, given the costs of supply are increasing as internal capability is reducing. The alternative is to push harder with the shrinking incumbent team, meaning the business is failing to attract and keep the right people while simultaneously burning out its existing team – a bad cycle or catch 22 that’s proving hard to avoid right now.
Diplomatik has found that historical lag market indicators are not keeping up with or assisting clients to make fast, adaptive decisions purely due to the pace at which the market is evolving. Diplomatik are working on a series of articles that look at different areas of the talent equation, focusing on the anecdotal market shifts and trends we are witnessing, in an effort to help businesses stay in front of an incredibly fast changing recruitment equation.
This article is purely looking at the remuneration and benefits elements of the talent attraction equation.
The great reset, the great redundancy, the great reshuffle… regardless of how you refer to it, the Pandemic is seemingly changing everything not just now, but well into the future, and potentially even permanently. Employers are saturated with this information daily, so much so it can become overwhelming. We have seen many employers trying to adapt quickly, be unique and offer more, but still feel like they’re in a losing battle right.
Job Market Trends – Early 2022
When reviewing the attraction of adequately trained persons to vacancies for Diplomatik clients, some anecdotal trends we have observed in early 2022:
- Groups that moved to 2/2 even time rosters, are not proving a strong attraction anymore. We are seeing a much higher uptake of 8/6, 7/7 and weekly rosters (Mon to Fri) for FIFO work. Metro works are increasingly offering work from home or changing/ alternating rosters where possible.This plays to the ‘I want it now’ type mentality we see in workforces and workforce data worldwide, where employees have larger choice and are questioning the fabric of what employment actually means to them. If there is a consistent trend to be drawn, it appears more breaks more often seem to be more popular.
- Most workforces are moving towards instant gratification or things that personalise (or feel like they do) to the worker. Most are using buzz phrases like work life balance, high pay rates, best incentives, and added holiday leave – all of which are being trialled. This can be a distinctive challenge to achieve for groups that work to rosters or large team schedules.
- Pay rates are high and still climbing for select areas. This seems counter-intuitive to the constant rhetoric that wages are not keeping up with inflation in Australia.Our experience is that this is not true for all areas. In fact, the pay rate has seen increases of 20%+ over the last 12 months in WA across various sectors due to the market rush to grab talent. Unfortunately, areas hit hard by Covid and industries with base line wages and large employment structures have been struck with slow wage increases. This means a two-speed employment economy is growing with remuneration living out different narratives over different industries.As a clear example, right now we have seen factory work in WA increase in wage by 2 to 3% over many groups, but mining trades wages have increased well over 30% to many of our clients.
- Employers are getting creative in what’s offered to attract talent without focus or strategy, resulting in failed and costly gambles. We’ve seen Jetskis, alcohol, holidays, prizes of all sorts offered as immediate bonuses to sign up as new employees quickly.Our opinion is they create more havoc than the short-term problems they solve in the long run. It appears this is more a measure of (understandable) desperation – trying radical options without much proof it will in fact assist. This supports the notion that employers are experiencing very high levels of stress and pain.
- There is currently zero credible evidence that opening state and international borders will have any large meaningful impact for some time – it’s all opinions and assumptions. Undoubtably, borders opening will have some relieving impact, but this is unlikely to scratch the surface of business concerns in Western Australia.Worldwide, the pandemic has caused extremely low unemployment numbers with under employment expanding where many people are choosing part-time work or sporadic rosters over full-time roles. What was historically 2 FTE is now looking more like 3 employees due to many not wanting a traditional FT role. This is reducing capability per headcount now with less hours per head being witnessed.Diplomatik constantly hear that casual labour providers are under employing people. In the industries we service, we are not seeing this occur and additionally, we offer permanent employment for all employees before 12 months casual employment as standard process.Over the past 12 months we have not had a single acceptance by a casual employee – feedback being they prefer the casual hours and fluidity they have through choosing when they work, and they like the higher casual loading. We would prefer to convert casual employees to permanent wherever possible, but it appears employees are choosing not to do so at this time more than ever before as they know they have choice in the market and feel more secure with the low unemployment rate remaining steady for some time.
- Currently in the UK and other countries, a very large portion of the current workforce are not turning up for shifts each day due to Covid and close contact rules. This is also impacting the FTE headcount it now requires to fill what used to be 1 FTE position prior to Covid.
- In regard to current International Recruitment, there are even more reasons retention will fail for larger scale geographical moves. We have seen many interstate and international people leave abruptly as they rightly focus on family emergencies due to Covid or travel challenges – meaning they often do not return after the initial scare. So, finding them is one issue, and keeping them is an even greater issue. Somewhat worse than never having found them at all, an employer then has to pay all the heightened costs to find and relocate the employee only to subsequently lose them.To provide integrity to that statement – we have the ability to immediately complete international resourcing for clients from the UK and Asia, however we are currently advising clients not to pursue this as the costs are high and the risk of failure is even higher. Our recent case studies to peers in this area from late 2021 re-tested the marketplace and advised clients appropriately, re-enforced that.
Note: we have additional detail on the training programs we have seen provide medium to long term solutions for skills short markets available separate to this paper.
Quite disheartening in and of itself, it’s just the tip of the iceberg in what has become a very difficult area of expertise with anecdotal proof and super quick adaptations of workforces occurring. Kotters 8 Step Model of Change is certainly not being adhered to by workforces and workforce planners worldwide, it’s more like Covid’s own 2 Step Model of Change is enacting itself.
Remuneration & Benefits as a Solution
Our professional advice and perspective on Remuneration is that very few groups can offer extremely high benefits over the entire offering for any meaningful length of time. We advise our clients to make a strategic decision right now on what they want to offer that sits them ‘top of tree’ when compared to peers, in one particular offering only rather than try to be adequate or even pretty good throughout their entire employment benefits offering. Certain brands or specialists can avoid the following if they have a market share dominance or an extremely refined identity in a geographical location, but for 99% of employers this is not the case.
An example of what we see many businesses do right now is increase wages just above the top 50th percentile, add a bit of extra holiday leave, slightly higher super, good roster etc. as a package. Sounds like a nice job and certainly a nice offering but not compelling in any one area of the offering. If it has any impact at all, it appears very short lived and easily countered by peers.
By nailing one specific part of that offering, employers will stand out and successfully capture a selection of people with a compelling offer that leaves them with little choice but to consider it. An example would be pay rate in the top 10th percentile with all other conditions standard, a pay rate at the 50th percentile but double the leave or double the super etc. Sacrificing the higher cost of lifting the entire offering, to lift one specific element of the benefits scheme to its highest level as the standout, develops the attraction narrative. With any fast response, careful investigation of your current standard employees such as age demographic, backgrounds and pastimes can assist employers to mould the right offering to new employees that will slip into your business seamlessly. Clearly, the single key part is picking something that can be absorbed in the cost or impact for the foreseeable future and pitching that as your ‘market difference’.
Attracting people appears to have become more a marketing game than a compelling full picture. Retaining them however is the other conundrum you may want to better define as well, which encompasses its own article.
We understand this is just the Remuneration and Benefits part of the talent attraction equation, however we see this section of the equation moving higher in the decision chain of employees as it continues to grow and the market becomes hyper competitive for the best talent.
Is there an outsourced solution to complement?
Casual Labour supply helps, as do good retention programs and good HR facilitators. These all carry significant extra administration for a business if they are to be done safely and effectively internally. Some of these costs savings and efficiencies can be achieved by outsourcing.
At Diplomatik, we currently undertake many works at different levels and see more employers willing to try new ideas and innovate beyond the standard comfort zone. What is certain, is that businesses need to get better at pivoting quickly with offerings to employees based on anecdotal evidence, and risk being wrong in an effort to keep up with the market, and to then pivot again if necessary. Outsourced workforces can allow for trialling those ideas and influences without the inflated risk of integrating a new offering internally, and can help define what is the right attraction scheme for the long term through safer trial and error.
Want to know more?
The easiest way to understand the benefits and immediately understand the opportunities for your business is to book a quick 30 min call with a qualified Diplomatik Consultant. Diplomatik is a highly accredited and insured expert in Australia and is happy to provide complete transparency and governance for its clients.