Show Them the Money
To Win the War for Talent
In today’s passive, candidate-driven market, employers do not have the upper hand in the recruitment process. Despite the rising rate of retirement among experienced professionals, which is forcing organizations to increase their hiring efforts, real wages have remained virtually stagnant. According to the Bureau of Labor Statistics, average real hourly earnings increased by only 0.7 percent for insurance employees between December 2017 and December 2018, compared to 1.3 percent for the general economy. As a result, professionals today feel more and more inclined to switch jobs for higher salaries.
The problem is only going to intensify. With industry unemployment virtually nonexistent and organizational plans to increase staff this year, the insurance talent marketplace will become even more candidate driven as demand continues to outpace supply. It is crucial that the insurance industry start proactively revising its compensation plans in order to gain a competitive position in the talent marketplace.
Yet, many insurance organizations are unprepared to compete. Some still try to hire new employees without offering an increase in salary; however, lateral compensation is simply not motivating for candidates. Neither are minimal salary increases. In fact, candidates usually demand a 15-30 percent pay raise to even consider an offer. Often companies look inward for a cost-effective solution, utilizing their in-house resources and making internal promotions. But as the war for talent intensifies and the retirement rate increases, there may not be enough qualified candidates on those internal benches.
Many companies also make a practice of counteroffering when their employees resign in favor of another job offer. They believe by providing higher salaries, employees will not only stay but will be more motivated and show more productivity. Although this strategy may work some of the time, contrary to popular belief, counteroffers are rarely effective. A survey also shows more than half of all employees who accept counteroffers eventually change employers within the following two years.
Cost of Vacancy
The cost of vacancy needs to be considered as well. When a position goes unfilled, employers are at risk of shifting workloads and compromising morale, while losing competitiveness and market share. The burden increases once organizations consider the additional cost of recruiting, onboarding and training new hires as replacements. Depending on the position, it may take up to a full year for new hires to fully adjust and fill the shoes of their predecessors.
It is important to remember adjusted salary levels should be aligned not only with industry competitors, but also with the general economy.
Competitive pay allows insurance organizations to retain their employees and avoid the burden of vacancy. Attractive compensation will also help organizations draw interest from more qualified candidates in less time, ensuring those roles are not left vacant for long. Salaries must be high enough to entice passive individuals to not only leave their current jobs but also to motivate current employees to stay in their positions. It is critical to view wage increases from a long-term perspective, as it may eventually be inevitable to maintaining their workforces.
The Future of Work
It is important to remember adjusted salary levels should be aligned not only with industry competitors, but also with the general economy. The future of work will increasingly blur the lines between industries, prompting non-insurance organizations to attract insurance talent with transferable skills. It is best to adjust salary levels appropriately to ensure professionals are not inclined to leave the industry altogether.
Unfortunately, organizations are often faced with making critical compensation decisions with limited resources and information. Some organizations rely on their competitors’ online jobs postings. But keep in mind there are no set standards in providing salary information for job postings. Advertised salaries are sometimes inflated with sign-on bonuses, anticipated commissions and other benefits. While they are a good place to start, they cannot be the ultimate resource for compensation research.
Thankfully, many industry associations and research firms regularly conduct compensation surveys and provide the results to participants for a minimal fee. These can be valuable and accurate tools for employers to benchmark salary levels with that of their competitors.
In addition, insurance organizations can gain substantial insight into compensation by establishing a relationship with a professional recruiting firm.
The nature of their profession requires recruiters to have a deep understanding of the labor market and its up-to-date trends. Partner firms can offer guidance on how to develop competitive compensation packages that will allow carriers to stand apart from the competition.
Revisit Compensation Strategies
In the rapidly evolving talent marketplace, it is important to revisit compensation strategies to attract and retain top professionals. The war for talent is only going to continue and only those who are willing to pay the right price for top talent will have access to them. To meet the expectations of their candidates and employees, organizations need to offer enticing salaries and thereby have a better chance of outperforming the competition for years to come.