The war for talent is heating up and wage inflation is once again stalking businesses. What can employers do to manage and minimise that risk?
Businesses face a perfect storm of increasing energy and supply chain costs together with the unwelcome prospect of wage inflation. The need for efficient recruitment practices together with financial forecasting has never been greater, says our expert Gary Wong.
Gazumping is something homebuyers in a rising market will only be too familiar with. It is, many businesses tell us, now commonplace in the recruitment market.
Candidates that have accepted a new role and have yet to start are being offered and accepting alternative positions that come with higher pay or better working conditions. Business owners might think they have their ideal candidate only to find, often at the last moment, that they are back to square one and often in a worse position.
It is not just restricted to logistics and agriculture, as often reported by the media, but in social care, retail and hospitality, manufacturing, and financial and professional services.
Wage inflation is adding further to costs that many businesses will be unable to absorb, leaving little or no option but to pass on to customers.
For many businesses the recruitment process can be painfully slow, often through no fault of their own, dictated by candidates' employment contracts. Candidates with, for example, a three-month notice period may all too easily be tempted by a high offer from a competitor.
Employers are urged to review their recruitment processes to see if they can be sped up in any way possible and look to include a greater level of engagement with the candidate during any notice periods.
It is appreciated that this can be challenging and not always successful, but businesses need to think creatively across recruitment and onboarding processes.
Flexible working practices are also likely to play a key role, particularly for office-based workers. While some large employers, especially those based in the UK's larger cities, have said they want staff back in the office, questions remain over whether employees will vote with their feet and choose businesses that offer the flexibility we have all come to accept over the past couple years.
Wage inflation is never welcome and less so now as businesses struggle with increased energy and supply chain costs, post-Covid recovery and new trading arrangements with European neighbours.
The need for financial and cash flow forecasting alongside scenario planning is critical. If financial pinch points can be identified, they can be planned for and managed. That may involve speaking now to lenders or funders to help see a business through a financially challenging period.
Many businesses, still recovering from the Covid pandemic, will not be in any financial position to soak up additional costs leaving them with no option but to pass them on to customers. Customers, particularly those in complex supply chains, may too be experiencing similar problems and the need for considered communication for businesses in the situation is paramount to ensure no significant loss of customers.
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