Dive Brief:
- U.S. companies facing a tight labor market, high turnover and the biggest price pressures in 40 years plan in 2023 to raise worker pay on average by 4.1% — the largest increase in 15 years, according to Willis Towers Watson (WTW).
- Nearly three out of four companies (73%) attribute their planned pay increases to the need to attract and retain employees in a highly competitive labor market, WTW said Thursday, describing a survey of 1,430 companies. Almost half of respondents (46%) cited employee expectations for higher pay as a cushion against inflation.
- “With a possible recession looming, continued high inflation and employers grappling with talent supply challenges, organizations need to get more creative to address attraction and retention challenges,” according to Catherine Hartmann, global practice leader of work, rewards and careers at WTW.
Dive Insight:
CFOs who raise pay next year by 4.1% would still not offset the 4.4% slump in average real weekly earnings during the 12 months through June, according to data released Wednesday by the Labor Department.
Worker spending power has eroded as inflation surged last month at an annual rate of 9.1%, the biggest price increase since November 1981.
Employees are jumping ship to gain better pay and benefits. The quits rate, or the number of workers who left their jobs as a percent of total employment, has wavered since June 2021 between 2.8% and 3%, the highest rate since 2000, according to the Labor Department.
Tight labor markets have complicated business planning by CFOs in most industries since the start of COVID-19 lockdowns more than two years ago.
The number of unemployed people looking for work has failed to keep up with demand for workers, with the number of job openings roughly twice the number of job seekers during several months through June, the Labor Department reported Friday.
The 3.6% unemployment rate last month is slightly above the 50-year low recorded prior to the start of the pandemic in early 2020.
To attract jobseekers, CFOs and their C-suite colleagues are turning to non-monetary tactics, WTW said. Nearly seven out of 10 respondents (69%) have increased workplace flexibility, and 19% are planning such a move or considering doing so.
At the same time, nearly half of companies (49%) burnish recruitment offers with sign-on bonuses or equity/long-term incentive awards, while 21% of respondents are planning or considering doing so in the next few years, WTW said.
CFOs also need to ask “are there particular areas of the company where the answer is not staffing, but the answer is leaning more into technology and efficiency,” Hartmann said in an interview.
For example, rather than hire several administrative workers, a company may want to consider automating such tasks and recruiting a software engineer instead, she said.
Some companies are taking a more flexible approach to salary increases, she said, noting that 36% of respondents have increased or plan to increase the frequency of salary increases, with 92% of them adjusting salaries twice every year.
U.S. companies expect the labor market to loosen next year, in part because of the possibility of an economic slowdown and a decline in the demand for workers. While 94% of respondents currently have trouble filling open jobs, only 40% expect the difficulty to persist in 2023, WTW said.
