During challenging times, such as inflation, companies are much more careful where to invest, especially since the near future doesn’t look rosy. How should companies respond to these economic developments? A natural response is to cut expenses by pausing all the new projects, reducing the number of employees, training, freezing new hiring, etc. In the past, we could learn that in difficult times the winners are those who emerge these challenging times and seek opportunities to acquire the right assets, talent, and competencies. Investing in people who are making your business successful is the right thing to do during inflation. Take the unique opportunities you have now and invest in the future of your business.
How Inflation Affects Hiring
Just because unemployment is expected to increase doesn’t mean that hiring will decrease. Santangelo says, “Firms aren’t going to slow down hiring; they’re going to change the way they hire.”
Challenging times are difficult for investments of any type, but they separate companies from the crowd. During a recession, talent is more readily available than during an expansionary phase. The truth is, we are in the middle of a war on talent, but at the same time, we are at the beginning of massive layoffs in the tech sector. Due to inflation, many companies are changing their strategies, reducing headcounts, and cutting down salaries. This situation is creating a massive opportunity for anyone ready to invest in talent. In uncertain times, employees are searching for steady employers. For example, Samsung hired the best brand managers during the great recession of 2008 to 2009. Thanks to this decision, they became a global leader in their niche.
But how will inflation change hiring strategies? Even now, many employers are turning to HR outsourcing as a solution. HR outsourcing creates the opportunity for employers to hire talent anywhere in the world, without the risk of having or creating a permanent establishment. Not only employers who are outsourcing their workforce can access the best employees, but they can offer the best benefits for them due to decreased cost. And by far, we’ve learned that employers who are offering better resource management, enhanced flexibility and agility, better employee benefits, and superior human resource planning are winners in the war on talent.
Challenges for Employers
Recruiters face two new challenges: rising wage expectations of job seekers and online job advertising costs that have spiked after declining for a decade.
Even though many companies are backing up due to inflation, the labor market is still very tight, and job openings are record high. That’s why employers are raising wages to attract talent. Average hourly wages went up over 11% for all employees in March 2022 compared to the beginning of the recession - February 2020. Recruiters should prepare that this trend could expand as job seekers don’t want to lower the price of their labor.
Another challenge that recruiters are facing is that advertising jobs are not as simple as they used to be. Online job advertising rose after declining for a decade. This affects the budgets that recruiters have to spend for hiring. The online ad prices in June are higher by 26.2% compared to the year before.
How to Retain Talent?
Once you find and onboard the right talent for your company, even more, challenging is to retain them. There's an obvious solution - salary raises, but if you depend only on that, you won't be able to keep your head above water for a long time. A strong company culture helps companies stand out and keep employees for a long time. According to the Society for Human Resource Management, when employees are deciding whether to stay in the company or leave, recognition and value is one of the most important factors. Once again, companies need to adopt and have a department that is dedicated to retention. It is not enough to offer employees a good salary and a decent onboarding experience, employees are asking for more. And to stay ahead of the curve, you will have to invest time in listening to your employees' needs. In order to do so, it is best if you can outsource administrative tasks that are taking a lot of time in your HR department, and let them focus on your workforce's wellbeing.
Are there low-risk solutions?
The best solution for companies who would like to hire talent and reduce the risk and the cost is if they outsource it. Nowadays, you can hire employees in any country without having or creating a permanent establishment. Imagine having an extended HR department without spending thousands of dollars for hiring an HR manager. With the right EOR/PEO partner, you can hire employees anywhere and be sure that all contracts are in place and that your company is compliant. Having a team who speaks the same native language and understands the cultural expectations will help you with retention. This will help you develop better strategies to grant you a competitive advantage in the market.
EuroDev was established in 1996 in the Netherlands with a single, defined purpose to help mid-sized North American companies expand their business in Europe. So far, we have partnered up with over 500 companies and helped them define and meet their European business goals. Services provided include Sales Outsourcing, HR Outsourcing, and Digital Marketing.
Disclaimer: While we strive to provide accurate and timely information, please note that HR policies and regulations can change frequently. It is recommended that you seek guidance from our HR consultants to ensure that the data presented here is current and accurate.
Sources: Society for Human Resource Management