As employers struggle to fill vacant positions, they are having to offer higher wages to recruit new employees. But what about the incumbents? What about the employees who have faithfully stood by their employer through the disruptions of COVID?
When new employees are hired at rates more lucrative than equally qualified incumbents, the stage is set for pressure on the employer to raise wages across the board. The stress is being felt by employers of every size and in every sector.
“It’s happening all the time,” says Cindy Cushman, owner of HR2Fit, a human resource outsourcing service with offices in Tilton. “You can’t afford to raise everyone, but you also don’t want to lose the people who are already there, because they will go find another job if they find someone else is making more for the same work.”
Alison Milioto, owner of Blue Lion Human Resource Consultants, sees the same trend. “A lot of our clients are having that challenge,” she says.
At the NH Business and Industry Association, the statewide chamber of commerce, the issue comes up regularly, according to David Juvet, senior vice president of public policy. “There’s no question that this is happening,” he says. “I don’t see any end in sight. People keep speculating about whether we’re heading into a recession, but employers are still going full speed ahead trying to hire and are reporting to us that they have multiple vacancies that they are unable to fill. I’ve never seen a recession in which you are still hiring people.”
Upward Pressure on Wages
Juvet predicts the labor shortage contributing to the upward pressure on wages is only likely to get worse before it gets better. “There are already 20,000 to 30,000 open positions in New Hampshire, and that’s not accounting for people of my generation who are retiring soon,” he says. “There’s not the same number of people coming up behind us to fill
So how can a business fill the positions needed to keep the door open, while not antagonizing the existing workforce at a time when turnover can be devastating?
Milioto recommends a variety of options that can be adapted to different situations. “There are different ways to handle it,” she says. Some clients bite the bullet and offer what she called “an inflation increase or market adjustment.”
Some hire newcomers at market rates and pray that staffers don’t share their wage information. “But we all know they can’t stop their staff from talking about what they make, or seeing the ad for $16 an hour,” says Milioto.
Another way to address the situation, according to Milioto, is to equalize compensation without affecting the overall wage and salary structure by using signing bonuses for new hires or retention bonuses for incumbents. A bonus can be repeated or withheld, based on performance. But hourly rates, once raised, are hard, if not impossible, to bring down. “It’s very hard to take away something that employees are getting today,” she says, which is why she advises her clients to be cautious about overpaying for new talent in the competitive market for recruitment.
At HR2Fit, Cushman has some clients that have been able to raise wages and pass much of the increased costs along to customers, but not all. And there is only so much money available to acquire new talent. “A lot of places have a budget, and they can’t move that needle,” she says. “So, they end up spending a lot of time, effort and energy finding that person who will take the lower rate. They just have to keep looking and hope that right person comes through the door.”
Often that “right person” is someone slightly less qualified for the position. That person can be hired at a rate comparable to incumbents while training for the position, with pay adjusted as they progress.
Another option is to fill that vacancy with a temporary employee from a staffing or employee leasing company, with an eye toward possible permanent hire. “You may be paying a little higher rate, but it’s an opportunity to bring them in and see if their work quality is equivalent to the rate you are paying,” says Cushman. “Or you could hire a temp until you can fill the job with the right person at the right pay rate.”
According to Kristen Wilhelm, owner of Orchard HR in Hollis, a structured approach to compensation is more important than ever. “Compensation is very complicated,” she says. “It’s so complicated that larger companies have entire HR teams that only focus on pay and managing the pay for their employees. For a lot of businesses that don’t have those resources, it can go a couple of different ways. Best practice is to have a compensation structure with assigned ranges for each role or each level within the company; you have some guidelines.”
Color Outside the Lines
Even with such a program in place, situations will arise in which you just have to color outside the lines. “If you find a candidate that you love, you may end up having to pay them more than your current employee. You may even consider paying them outside the established range, and that’s a conscious decision that a business has to make,” Wilhelm says. “Is this talent going to be so beneficial to the business that it’s worth adjusting the range or making internal adjustments to that structure. But once you do that, you potentially have another set of problems. You have some inequity and an inconsistency internally.”
Red River, an IT consulting firm headquartered in Claremont, “dug deep into its pay structure to ensure that an equitable pay environment existed for all,” according to NH Businesses for Social Responsibility, which gave Red River its Workplace Award for 2023.
According to NHBSR, Red River implemented a pay equity analysis at all levels to evaluate discrepancies in pay by gender, race or other factors and adjusted rates based on positions and locations. “They went through this extensive audit to understand if they were fairly paying employees on a number of different factors,” says Michelle Veasey, NHBSR’s executive director. Red River declined to comment on their payroll analysis.
Gender Gap Persists
One of the factors Red River examined was gender, an area where little to no progress has been made despite the labor shortage and upward pressure on wages.
“The gender gap in pay has remained relatively stable in the United States over the past 20 years or so. In 2022, women earned an average of 82% of what men earned,” according to a new Pew Research Center analysis of median hourly earnings of both full- and part-time workers.
“This has been a big topic for at least the past 20 years,” says Cushman, “and I would have thought we’d have seen a shift by now, but the needle has not moved as much as people thought it would.”
Milioto cites data showing that inequality persists for several reasons. “We all have unconscious biases that we don’t realize,” she says. “So, I always recommend that if you have the ability to redact names on applications and resumes, so you don’t see it’s Bob or Sally, you should do that. Same thing for nationalities.”
And do not ask prospective employees what they were earning previously. “That is one of the biggest things that perpetuates inequality,” says Milioto. “If I had gender inequality in my last position and was underpaid, and the first question the interviewer asks is what did I make in my previous role, I’m probably going to be underpaid in the next role.”