Ireland’s thriving business environment has expanded market needs across multiple sectors. The shortage of trained individuals in key industries, on the other hand, has created a serious burden for businesses in terms of talent acquisition and retention. The knock-on effect of this is that the impact on salary costs has been significant, with companies being forced to give greater wages in order to attract and retain personnel. While this trend benefits individuals by providing greater pay packages, it also offers challenges to Employers and the wider economy by increasing labour costs.
Influencers on Employee Retention
As revealed in our HR Barometer 7.1, published last month, the pressure on Employers to increase salaries in order to retain Employees is clearly evident. “Higher Remuneration package with new Employer” was cited as the most common reason provided for leaving employment by the end of 2022. Over half of Employers surveyed (66%) said that Employees were attracted to new opportunities due to higher remuneration packages, likely influenced due to the general skills shortage out in the marketplace and the trend to increase salaries to retain Employees.
Retention has not unexpectedly remained the top priority for Employers in 2023 resulting in 51% of Companies surveyed using the bargaining power of increased remuneration as an incentive to improve Employee retention.
With Pay being the biggest influencer in Employee retention, our HR Barometer 7.1 also highlighted that four out of five (80%) of Organisation plan on increasing salaries in 2023. This is a significant increase on our findings from our HR Barometer 6.2, November 2022 when 53% of Organisations said they would plan to increase salaries in 2023.
However, a worrying highlight is that since March 2021 (HR Barometer Series 5.1) this figure has increased by 39% from 41% of those surveyed to 80% of Employers in May 2023.
The actual or anticipated percentage salary increase planned for 2023 is 4.72% and is closer to the expected average inflation of the year estimated at 5%. Interestingly smaller Organisation expect to apply a slightly higher increase of 5.1%.
Driving this trend of anticipated salary increases has been prompted by a talent shortage compounded by inflation and the rising cost of living, which saw the Consumer Price Index (CPI) rise by 7.2% between April 2022 and April 2023.
National Wage, Public, and Private Sector Pay Increases for 2023
In January 2023, the Tánaiste and Minister for Enterprise, Trade, and Employment Leo Varadkar received Government approval to accept the recommendation of the Low Pay Commission to increase the National Minimum Wage to €11.30 per hour from 1 January 2023.
This represents an 80 cents increase, or 7.6%, on the current National Minimum Wage of €10.50 per hour and will see at least an estimated 164,700 people get a boost to their wages. For someone on the National Minimum Wage working a 39-hour week, this translates to a pay increase of €31.20 per week or more than €120 per month, or €1,600 per annum.
With both the public and private sector planning on increasing wages the pressure on Business owners to compete competitively and attract talent that will stay in their employment is getting more expensive.
We need to be Concentrating on the Employee Experience Also
The skills shortage is also having a considerable influence on the employment landscape with further pressure on Employers to be more flexible in terms of work arrangements and benefits. A decrease in attracting international talent and general skill shortages with continued market demands have led to higher workloads, Employee burnout which has affected the overall Employee Experience.
Whilst increased salary demands remain is it extremely important for businesses to ensure that the total reward and benefit support from an Employer are high priorities for any business in attracting and retaining key talent.
Interestingly in our recent HR Barometer Survey 7.1, Career Progression was cited as the second most common reason for leaving employment with just under 5 in 10 (48%) referencing it as a reason for attrition. Investing in your Employees and showing them a path to a successful career is a substantial part of encouraging Employees to stay and grow within your Company. Mapping the architecture of your future workforce and creating a framework for skill development for current and potential new Employees will foster a culture that looks beyond remuneration and to future security within your Organisation.
While our research shows that Employers can expect demands for salary increases to continue, they also need to consider a more holistic approach to retention. A robust retention strategy can often provide the competitive edge to keep the talent you have and improve talent acquisition. This can create some serious challenges for a Business owner and/or HR department. Our experience and expertise in Adare HRM can discuss new ways of thinking in terms of Employee retention and development.
If you require advice or guidance on developing your Employee Retention Strategy, please contact any of the Adare Human Resource Management team at (01) 561 3594 or email info@adarehrm.ie for more information on how we can help and the supports available under our Partnership Programmes.
Adare Human Resource Management is a team of expert-led Employment Law, Industrial Relations, and best practice Human Resource Management consultants.