Is inflation impacting retention? A conversation with Leigh Walker

Are inflation and higher prices costing you your best talent? You’re not alone. 4 million Americans quit their job every month – nearly 50 million a year – looking for higher salaries, better benefits, and more flexibility.

We spoke with Leigh Walker, Producing Director here at Adecco, to pinpoint the exact reasons why employee retention has become a pain point – and what companies can do about it.

Why workers think it’s not worth it to stay

The Bureau of Labor Statistics reports that almost one in four employees spend a year or less at their current company. According to Walker, the reason for this comes down to three main points:

1. Salaries don’t match the cost of living

“If inflation's risen to 9.1% and gas is now 50% more than it was last year, now that $21.00 an hour job is more like $16.00 an hour,” he clarified. With the average salary raise in the US being a low 3-5% per year, workers are finding it more advantageous to quit their current jobs for higher-paying positions than to stick around hoping for higher pay raises. This phenomenon, known as salary hopping, is becoming the next big trend in hiring. Walker explains:

“Salary hopping is becoming a big thing because people, especially millennials, they figured out: Well, I can get a 10% to 20% pay increase by leaving after a year instead of only a 3% increase from my current company. So, it's becoming much harder to find younger candidates who have been at their job for three to five years at a time. That's almost unheard of now.”

According to Walker, companies now must look to those they’re hiring for a salary range. “The market dictates the salary, not the other way around. If you've read a report about what a good salary range is in one month, that could change.”

2. Companies aren’t going remote

Rising gas prices mean it’s getting more expensive to commute to the office. This, on top of inflation eating away at salaries, is causing more workers to quit their current jobs in search of remote positions. Walker has seen this preference for remote in his daily interactions with talent: “Every candidate I talked to wants a preference of being hybrid or fully remote,” he said. “It's saving them money on gas. Now they're able to live cheaper. They're able to spend more time and get more done.”

And with costs of living rising exponentially in cities, more and more Americans are moving to cheaper cities – with remote work allowing them to keep their current jobs and salaries. “This generation is more about quality of life,” shared Walker.

3. Businesses lack empathy

Going to the office is a luxury – one many Americans can’t afford – and when companies don’t acknowledge this, they come across as apathetic. This is especially true for industries like manufacturing where the work must be done onsite. Walker details this contention saying:

“Manufacturing is struggling because a lot of their jobs, there's no option – they have to be in the factory. People have to drive, so think about it: If there's a job, for example in Pasadena, which is a high-income area in California. Where do you have to live? And then how far are you having to drive and what does that cost look like? I don't think that senior leaders are having either empathy or they're not fully understanding that it's actually costing them more.”

To remedy this, Walker explains that manufacturing companies need to either increase pay or move to a cheaper location with similar competitors in the area. “Manufacturing companies are having to drastically increase their numbers because the $18.00 an hour is not cutting the cost of living. Some of the companies I'm dealing with now, are moving out of more expensive states because…they can't afford to pay the expensive wages of that city.”

What companies can do about it

Apart from raising salaries, there are many steps organizations can take to keep their current workforce happy:

1. Offer better benefits

For Walker, he’s seen firsthand that benefits are just as important as salary when it comes to attracting and keeping quality talent. “More people want to know straight off the bat what are the benefits. We have to be very transparent,” he said. “I tell my clients during the intake call that they need to map it out and include an employee handbook or a benefits handbook upfront so that there are no surprises towards the end of the search.”

The top benefit everyone is on the hunt for? Healthcare. 85% of millennials say healthcare benefits are “absolutely essential,” especially post-pandemic. Walker agrees, saying:

“One week's vacation doesn't cut it anymore. People are concerned for their health. And I've told one employer, do you know how hard it is for me to pitch your company when people ask ‘Why doesn't the employer take care of their candidates by offering better healthcare incentives? Does that mean that they don't actually care about their candidates?’ What do I say to that?”

2. Provide skills training

Experienced workers know their worth – and, with prices rising, might be too expensive for your company. When competing with behemoths like Google and Amazon that can offer higher salaries and 100% paid benefits, changing your expectations can help you find and retain the right talent.

For Walker, that means dedicating the time to train employees who may not tick all the boxes at the start but can learn all the skills necessary over time. “Now you've got to be prepared to bring in a worker, upskill, and train them. You got to be able to put in the work with training and then keep training to maintain them.” With training, you’ll not only build the employee you need, but workers will see you care about their careers, instilling a sense of loyalty. 

3. Focus on 1-to-1 coaching/mentoring

Younger generations are looking for mentors who can help to coach, mentor and develop in their career. 

“Giving team members the one-to-one attention, and helping them continue to grow not only as people but also in skillset has been shown to create stickiness and loyalty within companies.”

4. Create a rewards program linked to productivity.

Reward programs don't necessarily need to be additional monetary bonuses. They can include additional days off or gift cards linked to attendance, productivity, or other critical metrics.

According to Walker, tying a reward program to productivity has been particularly helpful for a lot of business struggling to compete with much larger companies. Creating strategies to reward high achievers can also help maintain top producers, and offset the cost of productivity for those agreed upon metrics.

5. Refocus on lower-level positions and create a growth plan.

Those most impacted by inflation and rising costs are the ones holding entry-level positions. Lower-lever jobs are not only paid less but for sectors like manufacturing, are also the jobs that need to be done on-site. Walker suggests that companies re-examine how they’re getting in entry-level talent:

“What I'm seeing is a lot of clients who are changing their strategy from being temp focused to now being more permanent placement focused. Then they're having to look at the culture in those lower-level jobs. What are we asking them to do? Are we asking them to work back tons of overtime?”

If your company in particular is looking to find and retain great entry-level staff, look no further than Adecco Permanent Recruitment. We’ll help connect you with the best workers in a variety of industries at the best rates – no matter how high inflation gets. Contact us today to see how we can help you with direct hires and temporary workforce.