With the start of another year it’s a strong labour market with just a 3.7% unemployment rate, close to its lowest rate in 50 years… So, what does this all mean?
The unemployment rate measures the number of unemployed people actively looking for work. And yet, the unemployment rate is a “lag indicator,” which means it rises and falls in response to changing economic conditions. When the economy is weak, the unemployment rate rises and when the economy recovers, unemployment rates go down. With many business sectors normalising following restrictions imposed by the pandemic, the economy is returning to its new normal. However, it’s possible that it can all come tumbling down with the recession deepening in 2023. So what does this mean?
In 2023, there will be a continuing focus around employee retention:
- Businesses will boost retention effort
The average cost to replace an employee is twice their annual salary. This means employers will be more likely to negotiate benefits, pay, and other reasons an employee wants to hand in their four-week’s notice.
Pew Research Centres found that low pay, no opportunities for advancement, and feeling under valued at work were the top three reasons employees quit. As a coach, I’ve seen these reasons clearly echoed in many exit interviews I have facilitated. Other reasons included child support issues, lack of flexibility, poor benefits and too many hours.
But let’s be blunt: Quiet quitting was always coming. Take a disengaged workforce, add a pandemic (and childcare) onto the plate, and an extra hour of work per day… Presto!
Workers first course of action should be talking to their employer about the reasons behind wanting to quit to find an amicable solution.
2. Redefining work from home
Spotify initiated a “Work from Anywhere” program in 2021 that allows employees to choose where they work. While many employers offer work from home and hybrid options, Spotify employs 6,500, making them a example. What they found was lower attrition (by 15%!), increased diversity, and less time to recruit. Their African American and Hispanic employee base increased from 12.7% to 18% and their female leadership population increased from 25% to 42%. Spotify reduced its time to recruit by 12.5%.
One of the key elements to Spotify’s success was the changes it made to its salary banding policy. Salary was no longer defined by city or region, which truly offers employees the opportunity to live where they want. Spotify noticed that 6% of their employees moved. Spotify employees have an increased presence in 42 US states, Sweden, Germany, Spain, and the Netherlands.
In 2023, it is anticipated that more companies will follow suit.
3. Pay transparency
In the US many states already have pay transparency laws. While these vary from state to state, most include a provision that employees do not need to disclose salary histories. Some include provisions requiring employers to disclose salary in job postings. The purpose of pay transparency laws is to close the gap on pay discrimination. Many of these laws also make it possible to negotiate a pay rise when changing jobs because previous salaries can’t be used as a starting point in negotiations. It will not be long before these laws appear in the UK.
Pay transparency closes pay gaps, increases retention, reduces salary negotiations, improves employee satisfaction, and promotes employee cohesion. One way to boost retention is to implement a pay transparency policy.
4. Redefining career paths
During the pandemic, employees were forced to negotiate in unchartered territory. The Great Resignation of 2021 saw a massive uplift in new business start ups. Quit quitting dominated 2022. And in 2023, we’ll likely see a resurgence of career paths in the workplace as employers scramble to retain happy employees.
Employer-based career paths create an environment where ambition and hard work are rewarded with promotions and career advancement. It lists steps to take to progress into more advanced roles within the company. Developing in-house career paths lets the employee know they’re valued and will advance in their career without having to job hop.