Beyond the paycheck: Retaining and attracting talent in a transient world
Over the last few years of market shocks and geopolitical tensions, mid-market businesses have grown accustomed to bracing for the unexpected – and planning for it. Despite ongoing economic uncertainty, data from Grant Thornton’s most recent International Business Report (IBR) shows that optimism among business leaders remains relatively buoyant. As they entered 2023, 59% of mid-market firms were optimistic about the year ahead, only 6% lower than the figures six months previously.
Business leaders currently face a unique set of challenges. In many markets inflation and interest rates are high and, although economic growth is sluggish, employment rates remain high too, meaning that skilled workers continue to be in short supply. Firms will need to invest in their people strategies if they are to attract and retain talent and deliver for their clients amid these challenges. Good leaders know that they need the right teams in place to do this, and how they develop and invest in their people during this period will be crucial to overall commercial success.
A competitive market for talent
Competition for talent is tight and availability of skilled workers remains a key restriction in most locations. Labour costs also remain a concern, with more than half (55%) of mid-market business leaders identifying this as a barrier to business growth. Although down a few points from the highs of 59% in 2022, concerns about labour costs are still outstripping pre-pandemic levels, which averaged at 45% in 2019. However, for firms looking to make cost savings, reducing headcount may not be the most attractive option. A record number of businesses cite availability of skilled workers as a key constraint to growing their business (57%). Leaders will need to take a longer term view in how they address these challenges, so that they don’t find themselves short-staffed when economic uncertainty subsides and demand expands.
The struggle between pay and inflation
A key struggle for hiring and retaining top talent is pay. Wages are growing but for most they fail to keep pace with rising inflation. For example, in the UK, inflation fell slightly to 8.7% in April as energy prices softened, but prices are still rising more quickly than wages. The latest figures for wage growth show that average private sector wages had grown by 7%, while public sector earnings were up 5.6% – the highest growth rate in 20 years, but still significantly behind inflation.
Globally, four in every five mid-market businesses (82%) intend to give pay rises this year. Nevertheless, given persistent high levels of inflation and additional costs, there is a limit to what businesses can afford through pay rises, with only 24% of businesses indicating they intend to offer ‘real increases’ over the next 12 months. As a result, looking beyond the paycheck will be a major factor in retaining talent. As firms struggle to compete on pay, many are looking for other ways to stand out as an attractive employer.
Article by Grant Thornton Internacional
