TALENT IN THE POST-COVID AGE Part 5: The Price of Talent?

Over the nearly three years since the onset of COVID-19, I’ve stayed in touch with Talent Acquisition and RPO leaders from many industries. One common theme is the COVID “domino effect” – the pandemic forces one change, which triggers another, which leads to still others. Here’s an example:

?We know COVID took one trend that was already underway – a shift toward more remote work – and pushed it to the extreme. The pendulum is now swinging back the other way, but it’s clear things will never be the same. This is a story unto itself, but what’s surprising is how one falling domino has affected another – compensation. How? Consider this sequence of events:

?·????????First came the massive layoffs of 2020. Workers had their confidence shaken, and you could forgive them a somewhat mercenary attitude about what they expected from their post-pandemic jobs.

?·????????As the pandemic waned, the race to staff back up left everyone with a shortage of talent. At the same time, the Great Resignation created more vacancies, decimated existing talent pools, and forced many businesses to settle for a less-skilled workforce.

?·????????Workers suddenly found themselves in a position to exercise once-in-generation bargaining power, whilst rising global inflation motivated them not to leave anything on the table.

So, how do you find great hires amid a talent shortage when workers are demanding more flexibility than ever? Give it to them! Several executives tell me that flexibility about remote work lets them cast a wider net for most roles. Leaving required locations off job descriptions – something almost unheard of a few years ago – is becoming commonplace. Even in roles that require dispersed teams to work closely together, many list “anywhere in the U.S.” or “within Atlantic Standard Time (AST)” to remain flexible.

Okay, but what does that have to do with compensation?

This is where the domino effect kicks in. Many organizations rely on a cost-of-living compensation model, in which the salary of a given job varies based on where an employee lives. But when COVID obviated the idea that people live and work in roughly the same location, a new question emerged: If employees “work” in one market and “live” in another, how should they be compensated?

?Other organizations face a different question. They use a compensation model based not on an employee’s expenses, but on the value they bring to their jobs. One TA leader explains, “we say to employees, ‘you can live anywhere.’ And especially in the Bay Area, for example, ‘you can keep your Bay Area salary and live in Iowa.’” As appealing as this idea may be, it makes it hard for companies to know what the going rate is – or what applicants might be expecting – in different markets. As a result, many have seen counteroffers ranging from extremely competitive to downright inflated.

?This can be a mixed blessing. Since candidates no longer need to move to the city to find a good job, you can take advantage of top talent even in cheaper markets. Your candidate pool is now effectively much larger. You also have more wiggle room, at least in the short term, to combat staffing shortages by outbidding the competition. One TA leader in London described it to me this way:

?“It’s kind of a hybrid in this new environment. We can fill London roles with talent from outside London, and our new hires can take a ‘London job’ and remain at home. Some of our best hires, we never could have got them to London.”

?Salaries, likewise, have morphed into a hybrid between city and country: “We’re falling in between. We don’t have to pay them what they would get in London, but we’re also resetting the markets where they are.” And over time, this is bound to drive up costs everywhere, especially in what used to be the “value” markets.

?One TA leader warns, “We saw this within Latin America. People are paying U.S. salaries in Latin America and pricing candidates out of the market. They’re getting a 120% pay rise.”

?Disruption of the traditional link between work, home, and salary has even exploded the very concept of “mobility.” Future opportunities to move – either laterally or upward – are appealing to more engaged employees. But now, it doesn’t just mean within your office, your city, or your industry; It means anywhere in the world.

?And that’s the topic for our next discussion.

If you’d like to hear more about TA and RPO strategy in the post-pandemic hiring crush, watch for Part 6 of this series. You can also read all seven topics at once by downloading our white paper, "Talent Acquisition: Finding Balance on Shifting Ground.”