Labor Shortage: Higher Salaries for New Hires?

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In the context of a labor shortage, experts indicate that many companies must increase their salary offer to attract external candidates.

In the context of a labor shortage, experts indicate that many companies must increase their salary offer to attract external candidates. But in some cases, this practice can lead to a significant difference in salaries between new employees and current employees of equal experience.

In the offices of the energy company Peak Power in Toronto, the employees are all at their posts, working.

Further on, part of the office remains deserted, without workstations. work: this is where new employees will settle, once the company finds them.

This is the section of the Peak Power office that is currently empty, awaiting new hires.

We are looking to fill 15 positions within the company, says Leigh Billinghurst, the director of people and corporate culture.

Peak Power is therefore expanding. In all, the company currently has 67 employees, including executives.

Leigh Billinghurst is Peak Power's Director of People and Corporate Culture.

But filling these positions is not always easy.

“We have to be competitive, but we can't afford to offer salaries that don't match those of our employees.

— Leigh Billinghurst, Director of People and Corporate Culture, Peak Power

It's very competitive. It is difficult to find candidates, especially at the final offer stage. Some have several offers at the same time and can therefore choose at the last minute, explains Ms. Billinghurst.

One ​​way to attract recruits, according to her, is to increase the wage offer. However, Peak Power cannot afford to offer exorbitant salaries, in order to maintain a certain equity between its current employees and new ones.

Retaining our current employees is just as important as recruiting new workers, she notes.

Other companies can, however, find themselves in difficult situations if they decide to raise their salary offers too much during the hiring process, according to experts.

The salary becomes a very important element. While it's not the only one, salary can be the deciding factor in whether or not someone changes jobs, says Compensation Practice Leader Anna Potvin.

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Anna Potvin is the compensation practice leader at Normandin Beaudry.

Ms. for the Canadian human resources firm Normandin Beaudry.

In September 2022, this company released data that shows average projected salary increase budgets in Canada are higher than historical trends.*

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The Canadian companies surveyed therefore intend to allocate a larger sum to the salaries of their employees, for general salary increases and salary increases linked to the performance or performance of individuals.

The reason for this trend, according to the report, are difficult labor market conditions, such as staff shortages and low unemployment. He also cites the repercussions of the current economic environment, especially with regard to inflation and a possible recession.

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According to Anna Potvin, this data indicates that increasing salary offers to new hires is also creating pressure on internal salaries.

Salary pressure is also internal pressure. To hire someone from the outside, I have to pay X salary which is perhaps more than what I already pay someone internally with an equivalent background, she says.

< p class="e-p">The same goes for Michael O'Leary, vice president of human resources firm Robert Half.

“We can feel it – there is there's a lot more pressure on wages right now.

— Michael O'Leary, Vice President, Robert Half

The majority of new hires starting today are earning higher salaries, so companies need to be more creative in giving raises internally, he finds.

Michael O'Leary is vice president of human resources firm Robert Half.

This wage difference can then become difficult to manage for companies which, as Leigh Billinghurst of Peak Power argues, also want to make sure they keep their current employees.

But Michael O'Leary indicates that offering a higher salary to a new employee is sometimes a strategy aimed precisely at retaining a loyal employee.

As a company, I may have a lot of work coming in, which is causing my current employee's workload to increase. But I don't want him to leave because he's burnt out, so I have to find someone else who can take on some of the work, explains the vice president of Robert Half. /p>

“As a company, I might pay a little more to make sure I find someone so I don't lose my employee.” That's how bidding happens.

— Michael O'Leary, Vice President, Robert Half

For many companies, the purpose of hiring is therefore to lighten the workload of the remaining employees. But it can increase the difference in compensation between new and current employees who have the same experience, which can then cause old people to quit their jobs anyway.

C&# x27; is something companies wanted to avoid in the first place.

How can companies keep employees while attracting new workers?

According to experts, the key is to improve the overall job offer and communicate well with employees, especially during recruitment periods.

“Companies that have been working on their overall offering and organizational culture for a long time are now much better equipped to deal with the current situation.

— Anna Potvin, Compensation Practice Leader, Normandin Beaudry

I encourage companies to have good resource planning. When we invest time with our employees, that's where we create an incredible work culture. This is when people will stay, and above all will understand the company's strategy, says Michael O'Leary.

And that is precisely what intends to do Peak Power.

The Toronto office of the energy company Peak Power is located in the city center of the metropolis.

We are in the process of setting up a compensation framework for our employees as well as retention strategy rooted in employee surveys, says Leigh Billinghurst.

“We want to communicate well with our employees and get their they want and what's important to them at work.

— Leigh Billinghurst, Director of People and Corporate Culture, Peak Power

The goal of Peak Power, and many companies, is simple: to give a reason for their employees to stay… while attracting new employees to continue to grow.

*Normandin Beaudry's report was published on September 8, 2022. The company has surveyed over 750 businesses across Canada representing nearly 1.8 million employees.

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