It is my pleasure to introduce a guest blogger for this latest post. Dave Coons is senior vice president of our professional recruiting team. His insights into salary trends are worth a read. Enjoy...
Today’s insurance industry is a passive candidate-driven market. As increasing retirement rates and the widening skills gap force organizations to continuously hire, workers feel empowered to switch jobs for a raise in pay. In fact, 2.7 percent of people in the private sector voluntarily left their jobs this May, the highest level since 2001, according to the Bureau of Labor Statistics. Employees know job-hopping is effective, too. The bureau reported last month that real wages have remained unchanged for all employees since June last year, even though the overall unemployment rate has significantly decreased.
Despite the increasing number of candidates looking for better pay, many organizations are not ready to compete within this job-hopping environment. Some insurers still try to hire new employees without increasing salaries, but lateral compensation is simply not a motivating factor for candidates. Most job seekers consider lateral career moves as net-neutral decisions. Employers must start adapting their compensation plans in order to gain a competitive position in the talent marketplace.
Many insurers have traditionally promoted from within as a cost-effective solution. Promoting current employees with less experience not only costs less than external hiring, but decreases onboarding time and is beneficial to organizational productivity and employee morale. It sends a message that employees do not have to change companies to find professional growth and rewarding careers. But internal promotion is not always feasible. There simply may not be a qualified candidate on your bench.
As the candidate-driven market continues to heat up, insurers need to reevaluate their salary levels to continue attracting and retaining quality talent. Insurers must be prepared to pay salaries high enough to entice passive, content professionals to leave their current jobs and join a new organization. Employers can no longer rely on minimal salary increases. High performing professionals are not likely to move without significant financial incentive. Job-hopping candidates usually demand a 15 to 30 percent pay raise to even consider a new offer.
However, employers often find any increase above 20 percent problematic. They worry that such a wage hike will bring dissatisfaction among employees of the same level. To balance candidates’ expectations with those of the current staff, insurers must evaluate their overall compensation strategies to stay competitive with the overall market. Demonstrating that the company monetarily values all of its employees is a decisive weapon in standing out in today’s war for talent. Well-compensated employees are less inclined to leave – even for better compensation.
The cost of vacancy cannot be overlooked. The wage hike should be viewed in a long-term perspective, as it may eventually be inevitable to maintaining your workforce. When a position goes unfilled, insurers risk compromising workloads and revenues while losing competitiveness and productivity in the marketplace. The additional cost of recruiting, onboarding and training replacements increases this burden further. Competitively paid positions help retain employees. They also draw more qualified candidates in less time and help ensure roles are not left vacant for long.
Organizations are often faced with making critical compensation decisions with limited information and resources. Obtaining up-to-date market data is critical. Employers often ask for candidates’ previous salaries in an effort to determine how much to offer, but many major cities and states have started to ban this practice. For example, New York City’s employers have been restricted from asking about a candidate’s pay history since last October and Massachusetts followed suit just last month. This trend is spreading nationwide, as our nation continues to fight wage discrimination and the gender pay gap.
Online data is not necessarily reliable either. Employers must be cautious in interpreting fair market value from competitors’ online job postings. Advertised salary information can often be inflated with sign-on bonuses, anticipated commission and other benefits. Insurers looking to make informed decisions must remember there are no set standards in providing salary information for job postings.
Many insurance industry associations conduct compensation studies and provide the results to participants for a minimal fee. These can be a valuable and accurate tool for benchmarking your employees’ salary levels with that of like companies.
Establishing a relationship with a professional recruiting firm can also give you unique access to compensation trends and candidate expectations. Insurance recruiting firms offer a deep understanding of the labor market and its current trends. They can provide guidance on developing competitive compensation packages that stand apart from the competition and ultimately attract top talent to the table.
Candidates seeking higher wages are dominating the talent pool. On top of the aging workforce crisis, insurers are tasked with adjusting their compensation strategies to meet their employees’ and candidates’ expectations. You get what you pay for; and those organizations willing to offer enticing salaries have a better chance of staying ahead of the current labor crisis and landing the talent needed to outperform the competition for years to come.