Employers: Be wary of raising wages to improve retention
Slapping a higher price tag on a role isn’t enough; businesses must look beneath the surface to discover the real problems.
It’s a candidate’s market right now. Businesses like Amazon and Walmart are boosting pay more than ever to compete – especially for frontline supply chain labor. Most recently, Target announced its $300 million dollar plan to raise hourly wages to $24.
But is this expensive solution really effective in hiring and retention? The answer is not so simple. Without understanding workers’ pain points and priorities, slapping a higher price tag on a role isn’t enough. Businesses must look beneath the surface to overcome the workforce challenge and thrive throughout the Year of the Employee.
Raising pay: Only half the battle
According to the Bureau of Labor Statistics, corporate spending on wages in 2021 accelerated at the fastest rate in 20 years. It’s not just wages, either. Leading brands are investing in hiring bonuses, financial incentives, pricey perks and more, to attract and retain frontline talent. This is a big shift in the job market, as hourly roles were previously associated with few benefits.
Related: Work-from-home options spur blue-collar workers to consider new careers
But is this shift driving ROI? According to research, it’s important – but not enough. New 2022 Q4 data from more than 18,000 supply chain employees shows that pay is the second leading driver for turnover.
In fact, pay has climbed five spots since Q3 data was released. But the number one turnover driver is career growth – a priority that has remained supreme quarter after quarter. Other top drivers include job expectations and onboarding.
If your business is looking to hire and retain hourly supply chain employees, raising pay is a solution – but it solves only half the battle. In today’s market, where wages are record-high and employees are still constantly quitting, the best ROI comes from a data-driven retention strategy.
The real cost of misunderstanding workers
Many frontline employees leave within the first two weeks of joining – even if their pay is high. In fact, Amazon offered record bonuses in an effort to hire 150,000 seasonal workers, yet one source claims the turnover rate is still as high as 150% in some groups.
Employers can’t pinpoint true turnover drivers. Issues go unresolved, and financial band-aids get slapped on the problem. These short-term solutions are expensive and aren’t stopping the revolving turnover door.
Cost per hire is a figure that is often drastically underestimated. When calculating employee turnover, companies must consider sourcing expenses, salaries, incentives pay, benefit costs, new hire efficiency and more – not just the wage of the termed employee.
The average cost of losing a frontline worker is $12,876 — but depending on the role and your organization, the cost can exceed $45,000 per turnover event. With monetary incentives taking center stage in today’s labor market, businesses are losing millions of dollars to replace, train and onboard new employees.
The key is to understand employees better. However, many supply chain workplaces (such as warehouses or even the highway) are busy and isolating – leaving few opportunities for engagement with management or even co-workers. As a result, leadership can go months without holding one-on-one check-ins to get feedback on the employee experience. In these dynamic workplaces, nothing gets discussed, and nothing changes for the better – unless communication is prioritized.
Real ROI is hidden in employee feedback
The first step to a successful retention strategy is opening up the lines of communication. Employees need their voices to be heard. Without the tools to do so, a major disconnect will persist.
By investing in a user-friendly workforce retention solution, employees can input anonymous feedback on concerns, issues, satisfaction levels, and more from their mobile phones. Management can leverage feedback to assess trends and common issues, check in with workers, and drive real change like never before. Workplaces are ever-changing – and with access to real-time data from workers themselves, HR can continuously shift operations and processes to align with the wants and needs of the workforce. It’s a data-driven approach that replaces costly assumptions.
There’s nothing wrong with raising hourly pay. In fact, it’s encouraged as inflation reaches a 40-year high. But monetary incentives and higher wages shouldn’t be a one-stop-shop for attracting, hiring and retaining frontline supply chain talent. There is much more at play. The solution is to simply listen – and let the voices of your workforce lead the way. Turnover rates will drop, satisfaction rates will rise and raises will be an added bonus of the job – not the sole reason to join or stay.
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