It’s an interesting headline and might have some truth in it. In ‘Why salaries won’t lure new talent forever’ Personnel Today argues that as the talent war hots up increasing salaries to lure candidates may be short sighted, at least when it comes to attracting younger talent. They argue that money isn’t talking so loudly anymore.
The article is focussed on professional services, where starting salaries are booming, and they illustrate the point with newly qualified lawyers who are seeing starting salaries with some firms hitting six figures for the first time in some cases. However, a survey conducted by a recruitment firm shows a third of millennial lawyers would actually take a salary cut for more time off and flexible working. Law students, consisting largely of Gen-Z talent, are saying much the same - 86% said that in the post-pandemic world they would want some form of remote working and they are ready to ‘jump ship’ and join a competitor to get it and that a high salary is not their main focus.
For the firms trying to hold on to their talent, the article flags two alternative solutions aside from salary, both fairly obvious it has to be said. First, offering the type of flexible working that is being demanded by the younger generation and which lends itself very well to this particular sector, which is largely desk based and well-suited to being done at home. Secondly, diversity and inclusion – so, demonstrating that as an organisation you invest in your people, that you recruit from a diverse pool, and you show an awareness of social mobility, all of which the data shows are high priorities for the majority of millennial young professionals.
There is a third alternative, less obvious, which is something we highlighted back in July in ‘‘The Great Resignation’ – time to review reward schemes’ with Lynette Jacobs explaining how the strategic use of share plans can help to retain your best talent in difficult times. That was in light of predictions of a huge spike of resignations predicted in 2021 - 1 in 5 employees expected to leave their current job. That was the research by Cendex which was reported at the time by The HR Director. Not surprisingly, salary was cited as the most important factor for new candidates according to 54% of HR professionals questioned. Nonetheless, a third still expected to see the increase a high rate of resignations. The message to employers was to review reward packages and look wider than just salaries. So, for example, consider share plans.
Let’s hear again from Lynette Jacobs on this point. Lynette heads up our Reward Team and she joined me by phone from Manchester to discuss this:
Lynette Jacobs: “Obviously people have been thinking a lot about their jobs, their work, how they view their life during the COVID period and people may well be wanting to have increases in salary but they might also be looking for something more now and it’s a good opportunity for employers to review the whole reward strategy and perhaps take a more holistic approach partly because you may not be able to satisfy the salary expectations that your employees are going to be having otherwise. As part of that, a very good tool to look at is the use of share plans. That's where you offer employees the opportunity to receive share plans in your company, or your wider group company, so giving them a link between them and the company, or the wider group, as well as hopefully providing financial reward to them.”
Joe Glavina: “Can that be done in a way that is cost neutral?”
Lynette Jacobs: “Not totally cost neutral, but it can sometimes be I think perhaps surprising. The cost of putting one in isn't as high in terms of advisors’ fees, lawyers’ fees, administrators’ fees, as expected and as well as that importantly, depending on the type of plan, it can give tax advantages to your employees. So it may be that you're able to grant them an option, so a right to acquire shares in your company, and you can make that subject to the company or the individual meeting performance conditions so they only actually get those shares if they perform or the company performs - you can also have leaver provisions put in - and when they do receive those shares, that additional income they get, because they get the shares in your company, either immediately or at a later date, they can turn into cash by selling and that can be in a tax advantaged way so that they're not paying income tax or social security national insurance contributions on those as well. Equally, sometimes the share plan can give tax savings to the employer company, and you might be able to pass on the cost of the employer’s national insurance contributions that arise in relation to that award of shares to the employees and the company may well be able to have a corporation tax deduction so it can be a sort of win-win situation. It’s important as well, as I said, you can build in leaver provision so that those awards are only made available to the employees if they have stayed with you. So that's a good retention device.”
Joe Glavina: “Can I ask you about the frequency of reviewing the reward package because the research indicates half of employers only review once a year. In the current circumstances there is a lot to be said for more regular reviews.”
Lynette Jacobs: “Yes Joe I agree. Often companies do only think about looking at these things once a year but life, as we all know, is very fluid at the moment, things are changing the whole time. They're changing when in respect to COVID. Do we wear masks, do not wear masks? Equally, with your employees, now is the time to sort of pick up the pace at which you are doing those reviews. What may have worked for your company in terms of your remuneration strategy six months ago, three months ago, last week, may well no longer be what you need to retain and also attract new employees to your company. So, I very much agree with that report that suggests that you should be looking more often. Another thing that you can think about doing is having employee surveys. So, check with the employees that the mix of rewards that you're making available to your employees is what they're looking for. You don't want them to be lured away by other employers and you're left sitting there because you haven't given thought to it.”
Joe Glavina: “Can I ask you about benchmarking? How important is that?”
Lynette Jacobs: “You need to know what your competitors are offering to make sure that you are offering a similar package and, if you're not offering a similar package, perhaps if you're a smaller company, or times have been harder for you and you're not able to offer salary increases, that will give you the opportunity to think well, we need to do something else and perhaps that's your opportunity to think, well, let's put in a shared plan. That's a good way of building up brand identity, it can make employees feel loved, it offers inclusivity and also, importantly, for some types of share plans, it can give a savings opportunity to your employees which they may well welcome, and research has shown that, in many cases, the share plans that involve savings are the only opportunities that employees have for saving.”
Joe Glavina: “Final question Lynette. What’s your message to HR professionals listening to this?”
Lynette Jacobs: “You need to think about your reward strategy as a whole, it's a good opportunity to review it, think about the best strategies that you have to hold on to your staff to make sure that they're not lured away. I think it's worthy to note that in May this year, there was a study produced by the Social Market Foundation and that showed that for employees who own shares in their employer’s company or group, there is a better relationship between the company and the employees. The company itself has a better performance, and also the employees have a high level of financial worth and putting in a share plan, making awards under a plan, is a very good opportunity to give that tangible benefit to set up that relationship between you and your employees. Just a final couple of points. If you are putting in a new share plan, or you're making awards under a share plan that you already have, or you then put in, do remember that communication once you've made that award is so important. It’s going to lose all the benefit that you've put the hard work in for, and perhaps financial cost, if you don't then continue to use that, reminding them of that and retaining that link. Finally, on communication itself, don’t forget outside of any strategies, and putting in share plans, the importance of checking in with your employees regularly. So, either if they're coming back into the office now, regular face to face meetings, just checking how people are, their wellbeing, and if they're still working from home then setting up a Teams call, or whatever, or even just over the phone in the old traditional way, just to speak to them and check how they are. That goes a long way to preventing those resignations.”
If your business has a global presence, then you may be interested in our programme ‘International share plans ‘bring people together’ in Covid times’ where Lynette talks about the merits of international share plans and HR’s role. That programme is available now for viewing from the Outlaw website, along with all the latest developments.