I recently spent some time perusing the LinkedIN The Future of Recruiting 2023 global and India report. Like most LinkedIn reports, it is a treasure trove of data and while the report explores 17 trends under the themes of role of recruiting, economic uncertainty, employer branding, skills-first hiring and internal mobility & upskilling, the trends aren’t anything we haven’t seen or heard before. However, within the report lies a story that is more compelling now than ever; the story of how to hire for a role when money isn’t the competitive advantage on offer.
Prediction two in the report states that recruiting will have more say over pay. The report then goes on to state inflation, stagnating wages and a continued competitive labour market as key reasons why pay is the top priority for candidates globally. The report also throws in a fun fact – only 45% of recruiting pros say their companies increased salaries to keep up with inflation. While this fact helps understand why pay is on top of mind (hasn’t it always been?), it is also telling in many other ways; the primary being that candidates continue to have little insight into how pay ranges are determined and recruiters continue to have a tough time explaining why the ranges are what they are.
An extremely simplistic view is that organizations (usually) design for cost of labour and not cost of inflation. They determine where in the market they want to pay; e.g. 50th percentile and stick to it unless someone outstanding comes along for who they may make slight exceptions. Of course, reality is slightly more complicated and the model not ideal; but the reason I state this is because while there lies a strong co-relation between inflation and cost of labour, the macro economic factors from the last 12 months have indicated that the two can be inversely proportional. Thus, while candidates may seek higher pay due to rising cost of living, the ranges may not move given sparse open roles, low attrition and fewer pay exceptions.
Meanwhile, there are at least two other external factors that are turning pay determination an increasingly fun space to play in:
Pay transparency: The shift towards pay equality and transparency began with restrictions on recruiters being able to inquire about a candidate’s current pay. It then moved to pushing organizations to publish base pay ranges and other components along with the job description. This combined with the mandate to publish gender pay gap reports in an increasing number of countries shows that organizations can no longer choose to remain a black box when it comes to compensation. Organizational leaders can have an opinion on how much they’d like to share but governments are stepping in to challenge that opinion and even for countries where these laws are yet to trickle to, pressure from peers will drastically increase the pressure to be transparent. This is great news for candidates and recruiters alike. As John Vlastelica, CEO at Recruiting Toolbox says in the report, “As a corporate recruiter, I used to be proud of closing a candidate for a less-than-market or less-than-approved offer — now I’m embarrassed that I did that. That new hire becomes an immediate flight risk who can be poached with a better offer. We owe it to the business to share that perspective as we collaborate and co-create our company’s compensation and offer philosophy.”
It makes me immensely happy that we are placing more power in the hands of candidates and recruiters are shifting their mindset from closing a candidate for a less-than-market or less-than-approved offer to pushing businesses to pay more equitably. It is also good news for existing employees as increased transparency will make it harder to indulge in extreme pay variations to hire candidates in short supply without any pay interventions for current employees.
Government & trade unions on adjusting for inflation: At the same time, trade unions across the world (e.g. Austria and sections in the US) are also forcing the hand of organizations to adjust for inflation. The age-old model of pay for cost of labour is being placed under pressure like never before. To quote directly from the LinkedIn report, ‘As the leader with the clearest view of candidate priorities, labour market dynamics, and real-time recruiting performance at your company, you’re (the recruiter) in the best position to lead the conversation about pay and its business impact — from championing comp models that favour skills over pedigree, to retaining your top talent by pushing for pay increases that keep pace with inflation.’
But money can only do so much and that is why it is mentioned in only one of the seventeen predictions.
The real value of recruiters lies NOT in pushing for improved pay ranges but to keep the organization informed on other factors candidates are looking for. When pay is kept out of the negotiation, what tips the deal in our favour?
Is it increased flexibility? If yes, what kind of flexibility is most appreciated? What other benefits are candidates most excited about? Does anyone really care about unlimited vacation days and free food? Which skills are most challenging to hire for and why? How do we build a diverse workforce? What are they looking for? What other workforce models should the organization be considering? Are candidates looking to be gig-workers or do they still prefer the traditional full-time employee contract?
Ultimately, the real value lies in the answer to these questions. It is all the other sixteen trends on the report that stand out as far more important to me than the belief that inflation and pay should rise together. In an ideal world, yes the two are linked. Unfortunately, we aren’t there yet. I just wish LinkedIn had numbered that trend seventeen instead of two. What do you think?
P.S: This was first published here.
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