Winning the race for talent: how to attract and retain people in challenging times

Out-Law Analysis | 16 Jun 2022 | 3:27 pm |

Employers facing skills shortages and competition for qualified staff can stand out by increasing their attractiveness to existing employees just as much as being attractive to new hires.

Employers are finding it increasingly difficult to find and keep skilled employees because of demographic change, globalisation and changing views on work and careers following Covid-19 lockdowns.

High turnover rates and repeated hiring of new employees impose high costs on organisations, which are now seeking ways to attract and retain skilled people for the long term. Attractive remuneration arrangements alone are no longer sufficient; modern employers have to offer more.

We will examine, here and in future pieces, what the challenges are in the race for talent and how organisations can meet those challenges.

European employers are finding it difficult to find qualified staff and many employees are reported to be considering leaving their job. Experts expect an increase in resignations in European countries, echoing the ‘big quit’ seen in the US since spring 2021. The problem is not likely to be confined to Europe and the US.

It is more important than ever to focus on recruitment and retention of the right people. An efficient and progressive HR strategy has to follow a holistic approach, which begins with knowing what people want from their employer.

Employees are asking for an open and flexible working culture; development options; career perspectives and long-term financial incentives. People want to achieve not only professional, but also personal goals. They seek a productive, healthy and non-discriminatory working environment and a good work-life balance. Many want to directly participate in the business’s success or have a hunger for new challenges and the next career level. An organisation which proactively addresses these needs and wishes can reduce staff turnover and at the same time build a reputation for helping to recruit new talent.

Recruiting

Almost every employment relationship begins with a job advertisement and an application process. It is important to present your organisation as an attractive business with interesting perspectives. Businesses should recognise that increasingly they are applicants seeking the best talent. But while looking for new and creative ways to become attractive, businesses need to guard against creating false expectations and must stay within legal frameworks, in particular in terms of non-discrimination and data protection laws.

Employers often struggle with questions such as: is it allowed to advertise for young employees? Can you ask questions about family planning in a job interview? Should you screen social media profiles of applicants?

Diversity as a benefit

A non-discriminatory recruitment process is not only required by law in many jurisdictions, but also brings a reward to the business, since both the business and its employees benefit from diversity and equal treatment in the workplace. When people from many different backgrounds work together, their views and decisions are often more balanced, and the working atmosphere is more open and inclusive. Employers that provide for diversity take measures to prevent discrimination and inequality to create a balanced and productive working environment. Also, discrimination and unequal treatment can be reasons why employees leave their jobs, so avoiding these pitfalls can help reduce staff turnover and associated costs.

Progressive working arrangements

Work-life-balance and flexibility are often more important to potential employees than pay: For nearly three quarters of employees a good work-life balance is important, and most want to be flexible in their choice of workplace and working time. There are different tools to cater to these needs, but the use of them has legal implications.

Some employers offer the opportunity for a sabbatical after a certain time in the company. This raises questions about how to deal with remuneration, taxation and social security issues during longer periods of leave.

Other options include broader flexible working time arrangements such as unlimited vacation agreements, a four-day week or job-sharing. Offering of part-time employment requires the employer to think about the legal requirements and potential pitfalls of that practice. Employers might even be legally obliged to grant certain working conditions, when requested by the employee.

During the Covid-19 pandemic many employees became used to working from home. Although most jurisdictions have not yet have introduced a right to work from home, the past two years have lowered many barriers to home working and hybrid working arrangements have become mainstream. Remote working reduces commuting and allows employees to better organise the balance between work and private life.

But hybrid working comes with practical and legal challenges. How should the employer comply with workplace safety or working time regulations? How can it ensure productivity and prevent isolation? How can the new trend of ‘workation’ be realised and what needs to be considered in terms of immigration, taxes, social security? How do you get employees back to the office, when you want or need them there?

Remuneration schemes as an incentive

Pay is still a crucial factor for potential employees. However, competition has become stiff in many areas and a solid regular income alone is not enough to stand out in the race to attract talent and keep them for the long term. Employers are beginning to use long-term incentive models such as  stock option plans, employee shares and other mechanisms to increase employees’ stake in the success of the business.

Variable payment connected to performance or loyalty is another tool to reward employees on top of their regular salary and increase their motivation. Here, the employer must carefully assess what exactly it is aiming to reward. It might be personal performance, the business performance, the employee’s loyalty or social commitment. It must think about how different components are weighed. In some jurisdictions employers are free to establish variable payment schemes, in other places there are substantial legal obstacles.

Even potential employees at the start of their career are thinking about financial security in their old age. Company pension schemes can be an attractive option to cater to these needs and show that the employer cares for the people in the long run.

Depending on size and business model employers need to figure out which of these tools are possible and suitable to serve their purpose best and how to implement different schemes and models in a way that is legally sound.

Thinking ahead

When entering into an employment relationship it is important to think ahead and consider potential termination scenarios and their consequences. Depending on the business and the job role, it can be reasonable to agree on non-competition covenants to make sure the employee cannot join a competitor directly after leaving the business or establish a competing business. Notice periods, severance regulations and confidentiality agreements on trade secrets should also be considered in this context.

External talent

Few organisations can cover all their requirements with their own staff. Using employee leasing, freelancers or platform or crowd-sourced workers can help organisations meet their needs. Many employers rely on external talent for project work or use it to alleviate temporary staff shortages. However, these forms of work can come with substantial risks in terms of employment law, tax, and social security. It is essential to know the pitfalls and ensure compliance when using these forms of staffing your business.