How Inflation Could Impact Your Recruiting Efforts

ByContent Manager
Recruiting

The job market is tough right now, particularly for employers. Recruitment remains a key challenge. The majority (73%) of employers in the United States have difficulty attracting qualified candidates for open positions. And the majority of these employers expect this trend to last throughout 2022. It’s a stark difference from just two years ago when only about a quarter (25%) of employers had trouble filling open jobs.

Most human resources professionals understand the primary causes that lead to difficulties with recruitment, such as:

  • An aging population leaving the workforce and evolving expectations for new entrants to the workforce.
  • Opportunities for flexible working arrangements.
  • Stiff competition that attracts qualified workers to other jobs.
  • Decreased employee loyalty and increased autonomy.
  • New skill requirements.

But it seems 2022 has found yet another hurdle in recruitment – inflation. The inflation rate is the highest it has been in decades. The Wall Street Journal projects that salaries will increase for white-collar professionals by approximately 10% in 2022. This jump is substantially more than what is found in normal years.

The threat of inflation is so severe that the Chair of the Federal Reserve, Jerome Powell has stated, “High inflation is a severe threat to the achievement of maximum employment.” The inflation rate in 2021 was 7%, the highest it has been in over 40 years, which means that anyone who didn’t get a 7% raise is effectively earning less than they did in 2020. And with widespread supply chain issues, the problem of inflation is unlikely to resolve quickly.

And while inflation impacts everything from material supplies to the cost of products for many employers, it also impacts employee wages, which is where we see why it may make recruitment more challenging. Because inflation is so broad, it impacts everything factored into the cost of living. Moreover, it directly impacts purchasing power. When inflation rises, wages do not have the same purchasing power unless they rise at the same rate. Naturally, this leads to a shift in job candidate expectations. Consider that the mean annual salary expected by applicants jumped by 13%, from $53,676 in March 2020 to $60,610 in March 2021.

For employers, this often means that they need to increase compensation packages proportionately to stay competitive and attract qualified candidates. But it is not always realistic to increase compensation by this much, especially without making deep cuts elsewhere or raising prices (which exacerbates inflation further).

And in addition to having to increase compensation packages to recruit new candidates, employers often have to adjust the wages of current employees in tandem. Without this change, you may have disgruntled employees who resent new employees who make more than they do (or did as a new employee). And this type of job dissatisfaction can lead to an exodus of knowledge from your company should your current employers seek greener pastures elsewhere.

For these reasons, it is wise to consider the following variables when increasing wages to combat inflation:

  • Competitor Compensation: There is no denying that you have to offer at least what your competitors are offering to attract top talent. And in a job market with fierce competition for candidates, you have to know what else they may be offered. Even quick research can give you a great idea of what your primary competitors are willing to compensate new employees. This can be a starting point for any adjustments you make to compensation packages.
  • Budget: Paying for compensation packages that meet or exceed the inflation rate means you have to dedicate significantly more of your budget to workforce expenses. And the money has to come from somewhere. It may take some creative problem-solving to determine where to develop the funds you need to adjust wages.
  • Inflation Trends: It’s also good to know what the anticipated inflation projections predict. If inflation is expected to be prolonged, it may be easier to raise your compensation in tandem immediately. However, if the rate is only expected to be high for a short time, then you could consider smaller increases.

And while inflation is making recruitment much more difficult in all industries, it can make things especially challenging for highly skilled positions, such as accountants and human resource professionals. Human resources outsourcing is one way some employers can overcome recruiting challenges during a period of high inflation. This strategy can ensure you get a top candidate without taking a huge hit on your budget. Contact CA HR Services for more information about HR services that may be obtained by outsourcing.