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Hiring Likely to Stay Difficult Even During Downturn

With signs of an economic slowdown starting to enter the market, some employers may find a silver-lining in this economic news... potential easier hiring for much needed vacancies. While it is true that a severe enough recession will loosen up the labor market, it is likely to be a while before that happens given other demographic issues and early retirements that have occurred in the last couple years. While businesses will have to be forward-looking with regards to demand for their products and services, they are likely to continue to see a tight labor market for a short while until the market levels out. So how do you handle these two conflicting situations? These thoughts should help you navigate these unusual times:

  • Keep pay cautiously competitive. You will still need to offer a competitive wage, but the prevailing market wages are likely to start to level off or at least slow in growth. As you hire new team members, make sure your market intelligence on what truly is a competitive wage in today’s marketplace is still accurate. You may find that it has slightly regressed.

  • Keep benefits the same. A few months ago, I was saying that all boxes must be checked with regards to benefits, but in a slowing economy, it’s wise to leave benefits as they are. It’s not time to make any cuts as of yet because the labor market is still tight. However, if your benefits are decent for the marketplace, then it’s also not time to make any improvements.

  • Keep flexibility (!). Remaining flexible with your employees is likely beneficial to continue with regards to work-from-home arrangements or hour flexibility. While it may not be as necessary if the recession gets deep enough, it can continue to be beneficial in terms of attracting the best talent available for your business. And it generally doesn’t cost anything!

  • One-time bonuses instead of pay increases. If you find that you are still having difficulty finding enough available workers for your business, try signing bonuses or profitability-based bonuses that are one-time costs instead of a fixed permanent increase. Removing a one-time bonus later on is much more accepted by staff members than lowering a pay rate. This strategy can help you reduce unwanted turnover should we get into a deeper recession later.

These are just a few ideas to help during this time. The over-arching idea is to think long-term when making your compensation and benefits decisions given a likely downturn period in the economy, and not to over-extend yourself with regards to compensation promises. Anything you can do to keep key employees during a downturn is beneficial. You will want your best performers onboard if things get difficult.

Until next time, I wish you the best in your business.

Mark Goldman



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