Reducing salaries should not be seen as a long-term solution

The larger talent pool available to employers during the recession has resulted in the trend for reduced salary offerings and the need for jobseekers to be increasingly flexible with their salary expectations.

Pay freezes over the past two or three years have left many people feeling as though their career progression has been halted, and those not in employment have been more willing to accept reduced salaries; for permanent HR professionals who were made redundant in the recession, it has become commonplace for them to accept salaries £5,000-£10,000 lower that what they were used to.

It is understandable that some employers are under the impression that this provides them with an excellent opportunity to source strong candidates at reasonable rates. While there might be some truth in this, it doesn’t always bode well for the future, given that hiring talented candidates is only beneficial if they remain within the business.

A new hire can turn out to be a very costly if the candidate moves on again in several months. Unfortunately, there is a very real and imminent danger of this happening while employers continue to offer non-competitive salaries.

This has become a concern not just for HR professionals who are hiring, but also for employers hiring permanent and interim HR professionals. Interims’ salaries have significantly reduced and these professionals can no longer expect to earn a premium; two years ago, a professional interim may have commanded £500 a day, whereas that same candidate is now likely to be earning £300 a day.

Subsequently, employers are growing increasingly concerned about whether interims will commit to the full length of their assignment should the market pick up. The majority of professional interims will commit to an initial contract but will typically agree to an extension of their employment – for example, if a project is taking longer than planned. It is virtually impossible to predetermine a professional’s loyalty to the company, and although many employers will challenge a professional’s motives at interview, it is likely that the candidate will have prepared a stock answer.

In some of the larger companies, employers are offering salaries that will not entice people to move, and those people who do move are more likely to do so with reluctance or because they feel they have no choice. This can often transcend to less enthusiasm for the new appointment and therefore a longer-term lack of loyalty towards the employer and the business.

For employers to find – and retain – the most talented candidates on the market, there needs to be a change in the way that organisations attract talent. Relying on the assumption that people will be happy just to have a job is not feasible for the future, which means there must be more forward thinking in the market.

As soon as there is evidence of an upturn, there will be a huge amount of unrest if employees do not feel suitably engaged with their employers or don’t feel they are gaining enough recognition for their work. Unless comprehensive succession plans are in place, companies are unlikely to be prepared for a loss of skills and people when the market improves.

HR functions need to address this issue within their own departments and across the company, considering what other options there are to mitigate the risks of hiring people on a reduced salary.

For some employers, increasing salary offerings is not an option; in this instance, HR departments should be looking at improving benefits packages and working conditions as well as placing a strong focus on their employee engagement strategy.

Non-financial benefits such as additional holiday are being implemented across some organisations. Strong on-boarding policies can also have a positive impact on staff retention; however, according to our research with Personnel Today readers last year, more than 70% of organisations have no formal policy in place.

In some HR roles, skill shortages continue to prevail and this is where we can expect to see the first uplift in salaries. Talent managers and reward professionals have niche skills that are highly sought after and are therefore likely to be among the first to experience an improvement in the salaries on offer.

Julie Waddicor, director, Hays Human Resources

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