The acute talent gaps that businesses are presently facing have been well-documented in recent months. For instance, the Business Conditions Survey by the National Association of Business Economics found that 47% of respondents reported a shortage of skilled workers in the third quarter of this year. That’s up from 32% in the second quarter of 2021, which was already too high for comfort.
Meanwhile, research from a recent New York Times article says that, on average, job openings have increased by 35% — while job applications have decreased by 20% over the past year.
Beyond these headline numbers, talent gaps are having a tangible impact on both our everyday lives and the wider economy: Skills shortages across the U.S. are affecting everything from the opening hours of local 7-Elevens to our country’s national security.
The reasons behind this evident lack of candidates are, unsurprisingly, complex. Goldman Sachs has previously attributed ongoing talent shortages to enhanced unemployment benefits, which at one point provided up to $600 a week to jobless workers (on top of normal benefits). However, other economists dispute this. Regardless, it is worth noting that these extra benefits expired in about half of states earlier this summer and in remaining states in early September. Yet gaps persist.
The Problem With Sign-On Bonuses
The reality is that insufficient talent pipelines, shifting skills demand, and a steep retirement cliff have all helped to contribute to the current situation. And as employers struggle to navigate this landscape, many are turning to sign-on bonuses to attract candidates. For example, the likes of HCA Healthcare, Compass Group, XPO Logistics, Quest Diagnostics, and Ryder System have all reportedly been leaning heavily on sign-on bonuses. And they’re not alone.
However, desperate employers must resist the urge to “buy their way out” of the ongoing skills crisis, and should instead focus on long-term talent strategies that attract the right people. While financial incentives may appear to be a quick fix for filling vacancies, employment relationships that begin through such schemes may not offer lasting value to the business.
In addition to the extra costs incurred at the point of hire, incentives such as these are unlikely to attract candidates who are the right fit for your business. At the most basic level, individuals attracted by a one-off cash incentive may leave for another employer offering a similar perk as soon as they are contractually able to.
More importantly, though, job-seekers sourced in this way are unlikely to have objectively considered if the company they are joining meets their needs as an employee, shares their values, or is a place where they can grow and thrive professionally.
Remuneration will always be a deciding factor for candidates looking for their next role. But the reality is that candidates value an attractive compensation package built around a competitive base salary over one-off perks. Indeed, job-seekers consider a whole range of other factors when choosing which opportunities to pursue, including learning and development and mentorship programs, progression opportunities, hybrid or remote working opportunities and general flexibility,; fast and effective onboarding, and paid time-off benefits.
To secure scarce skills, decision-makers would be wise to direct time and resources into building a robust long-term talent attraction strategy rather than trying to buy their way out of their predicament. Instead of simply throwing money at the problem, businesses must work to build their reputation as an employer of choice.
EVP vs Comp
Given the current situation we find ourselves in, organizations must ensure that their employer brand is in the best position possible to compete for top resources. Building and communicating a strong employer value proposition (EVP) is key.
Even during times when talent is plentiful, the benefits of investing in your EVP are obvious. According to research by Gartner, organizations that effectively deliver on their EVP can reduce the compensation premium by 50%, and reach 50% deeper into the labor market when candidates view an EVP as attractive. What’s more, half of candidates say they wouldn’t work for a company with a bad reputation — even when there’s a pay increase.
So, a focus on EVP, harnessed alongside complementary recruitment strategies — such as offering a first-class candidate experience and tapping into underutilized talent pools — is vital to persuading people to join you over the competition. All of which is to say that while offering joining bonuses may seem like a smart way to snatch talent from the grasp of a competitor, this strategy is unsustainable.