It's a question that can pop in the minds of managers before a performance review period, or at ad hoc times throughout the working year - is it time to offer a salary increase to your staff? Sometimes the question can even come in the form of a pay rise request from your staff.
With today's job market incredibly cutthroat, losing talent to the competition is a risk few businesses can afford. In fact, 75% of Hong Kong CFOs surveyed believe it will be more challenging to find qualified professionals over the next five years.*
There are many factors that come into play when making salary rise decisions, budget of course being a top reason. But when possible, there are a number of advantages to approving a salary increase request from your employees, whether they’re incoming or existing talent.
A salary increase can win over talent
In a candidate-driven market, like what Hong Kong is facing today, flexibility when it comes to a starting salary can be the determinant that wins your bid in the war for talent. Offering an attractive salary increase for your preferred candidate is one way to move things in your favour.
Of course, there are many things that come into someone’s decision to accept a job offer - compensation being only one of those.
While a salary is important, it should be noted that it’s not the only way to compensate employees. Flexible working hours, attractive vacation packages, and professional development opportunities are also popular salary inclusions, and should be considered if a salary increase is not possible.
They can increase staff retention rates
But it’s not just about finding new quality hires. At just 2.8 percent, Hong Kong’s unemployment rate is at a 20-year low. It’s more important than ever to keep and foster the talent you already have.
High staff turnover is harmful for an organisation’s productivity and performance. But the price of losing individual top talent can be even more challenging and increase added pressure on current staff who have to burden extra workloads.
The Society for Human Resource Management’s 2017 Employee Job Satisfaction and Engagement reports compensation as being the second most important contribution to overall job satisfaction. But perhaps more importantly, the report found a negative relationship between pay satisfaction and turnover intent.
In other words, an employees’ decision to leave their current role can be connected to whether or not they are satisfied with their compensation package.
Offering your team a (justifiable) salary increase is therefore an effective means of increasing staff retention rates, though it’s important to note that this should be just one part of an overarching retention strategy.
Faster hiring times
The longer your search for a candidate, the more costly the recruitment process. It can be expensive, disruptive, and can cost you applicants - especially ones most in-demand. And more often than not, a lengthy hiring process does not result in higher quality hires.
Being able to move quickly on hiring decisions is only half the job though; offering an attractive compensation package - including a competitive salary increase for the candidate you wish to hire - is one way to gain a competitive edge over rivals.
Taking a closer look at salaries
Offering a salary increase is one way to demonstrate that you value your employees, recognise their good performance, and can often result in increases in productivity. The same can be said equally when hiring new talent - taking a closer look at the salaries you offer you offer long-term dividends when it comes to hiring and retention.
Where and when possible, salary increases are a good strategy to attract - and keep - talent, and one that every hiring manager should invest more time towards.