Attracting and retaining IT and digital talent remains the biggest challenge for companies around the world, and it’s an even bigger problem for employers than it was in 2021, according to a recent survey from WTW.
Employers are taking a variety of actions to attract and retain talent, including increasing workplace flexibility; applying a broader emphasis on diversity, equity and inclusion; offering incentives such as sign-on bonuses or equity/long-term incentives; and raising starting salary ranges.
Of course, global employers are also taking a variety of pay-related actions to retain talent, including:
A compensation review of specific employee populations (48%)
Targeted increases for specific employee populations (44%)
One-off cash payment, such as a retention bonus, lump sum payment or allowance (42%)
Full compensation review of all employees (37%)
Changes in compensation philosophy, such as updating salary ranges, extending pay-range maximums (30%)
One-off equity/long-term incentive payments or grants (28%)
Higher base salary increases for all employees (26%)
Globally, an astounding 96% of organizations have increased salaries – and salary budgets – to rates not seen in nearly 20 years (compared to 63% in 2020), said the report’s author, Hatti Johansson, global innovation and product development leader of rewards data intelligence at WTW.
Actual average salary increases in Canada hit 3.7% in 2022, compared to a 2.8% actual average increase amount in 2021. Budgets for average salary increases (December 2021 projections for 2022 vs. July 2022 actuals) were projected at 3.2% this year, but actually hit 3.7%.
Canada also lags behind the global stats. The average actual salary increase hit 4.9% in 2022, as compared to a 4% actual increase amount in 2021 among those organizations that granted increases in the top 15 economies around the world.
“But increased salary budgets only make it more critical for organizations to have a clear strategy for awarding pay increases as effectively as possible, prioritizing critical employees and hot jobs, and differentiating for performance,” Johannsson wrote.
Among those organizations that reported higher 2022 actual salary budgets compared to 2022 projections, the most cited reasons were:
Concerns over a tight labour market (57%)
Concerns related to cost management, such as inflation or rising cost of supplies (57%)
Employee expectations/concerns (47%)
“Ongoing and diligent monitoring of labour markets and economics combined with continual adaptation is the modus operandi for employers in 2022,” the report said. “For now, continued higher budgets are projected in most of the world’s largest economies. The 15 largest economies are forecasting an average increase of 4.9% in 2023, which is 0.9 percentage points higher than the 4% actual increase in 2021 and aligned with the 4.9% average increase granted in 2022.”
Indicators show that employers are continuing to return to a more-normal salary review process this year compared to the freezes of 2020. “Today, organizations are deciding how to focus their compensation spend for the greatest impact,” Johansson wrote. “This includes both monetary and non-monetary actions to attract and retain employees – particularly for critical or high-performing talent. Prioritizing and segmenting increases is vital for an appropriate return on investment.”
Johansson recommended employers prepare for the salary – and salary budget – challenge. “Labour markets and inflation have made 2033 another year of unexpected changes,” she said. “Even with these ongoing pressures, pay increases and the salary budgets that fund them must be allocated in line with market conditions and directed by clear business priorities. The best place to start? Reliable market data that supports these critical decisions.”