The impact of new hire salary disparity on current talent and how to combat it

A combination of inflation and talent shortages is causing many firms to offer new hires above market starting salaries, particularly in industries such as the technology sector. A survey by software firm, Capterra, found that 65% of hiring managers are currently offering higher than usual starting salary packages. While this can be an effective method of attracting sought after, skilled talent it can have a knock-on effect on employee satisfaction, morale, and productivity. The same survey found that 68% of hiring managers had one or more of their employees ask for a raise or threaten to quit because of salary disparity with new hires.

 

What are the long-term business impacts of salary disparity? 

If you have found yourself needing to offer higher than average starting salaries for new hires, it’s important to understand what effect this can have on your current employees, retention and how each impact long-term business success. 

Poor employee satisfaction can lead to: 

1. Lower productivity: Employees who feel underappreciated at work are 12% less productive and one study found that happier employees are up to 20% more productive.
2. Higher staff turnover and increased recruitment costs: 35% of workers in the Middle East would consider moving roles if they were unhappy at work
3. Loss of valuable knowledge and skills: when established staff leave, they take with them valuable internal knowledge and skills that can be hard to replace
4. Poor customer service and a loss of reputation: high turnover can cause your service to slip causing customers to become dissatisfied. A poor reputation can also make it harder to attract new hires. 
5. Huge differences in compensation levels between new hires and old hands can cause resentment and ultimately mean you struggle to retain valuable employees. 

 

Go beyond salary with these 4 solutions to drive retention and employee satisfaction 

At MCG Talent we have faced this issue with multiple client partners and while every business is unique, there are several ways you can ensure salary isn't the main driver of employee satisfaction and improve retention throughout the entire employee lifecycle. 
 
When we talk about the employee lifecycle we mean every stage of an employee’s time interacting with your organisation. That is, every interaction you have from the moment they first encounter your job description to the day they leave the company. 

Here are our favourite strategies to help improve employee attraction and retention: 

 

Diversify and highlight other aspects of your compensation packages 

In a time of tightened budgets and increasing costs, it’s not always possible to offer existing employees raises that match the salaries for new hires. Indeed, it may not be possible for your business to match the salaries offered to new hires by your competitors. However, salary is not the only way to attract and retain talented employees. 

Looking at the other benefits you can offer can be a great way to give employees what they want. PWC found that 25% of employees in the MENA region would prefer greater flexibility in how and where they work, this number is higher for younger workers, 43% of which would prefer remote or hybrid working. There is also an increased preference for health, wellbeing, and social benefits. 

Try surveying your current workforce to get an idea of what benefits they would prefer and what your compensation packages could look like to increase employee retention.  

 

Invest in the training and development of your staff  

35% of employees in the Middle East believe that career advancement is important to their happiness at work, 13% more than the rest of the world. Showing your commitment to invest in the development of your employees is a great way to improve satisfaction and reduce turnover - with the added benefit that it can help you address skills gaps. 

Provide new and existing employees with clear career goals and paths to advancement and offer training opportunities in key skills and areas of expertise.  

 

Sharpen up your employer branding

Your employer brand is a crucial way of attracting and retaining staff. How you are perceived by your current, former and potential employees can go a long way to helping you keep skilled employees around for longer. 

Good employer branding brings together your organisations values, people management and workplace culture into one marketable, compelling package that lays out why you are a great place to work. 

Step one of building an attractive employer brand is defining your company’s values and goals as an employer. Then you can build those values into your recruitment, onboarding and day-to-day processes. Once these are in place, leverage your employees as part of your recruitment marketing and streamline your recruitment processes to make it easier for candidates to apply. Above all shout about what makes you a fantastic employer!

 

Take steps to build a stronger company culture  

On that note, it’s important to build a company culture that not only reflects your values as an organisation but offers employees a chance to gain recognition and allows their voices to be heard when it comes to offering concerns, suggestions, and feedback. 

43% of employees in the region feel that being able to be open and honest at work allows them to build better relationships with their colleagues and 36% believe that this creates a more inclusive working environment. 

As an employer you can develop robust onboarding, feedback and review processes that facilitate this and enable employees to understand the expectations and norms of your workplace culture. Ensure employees feel valued by recognising their achievements both as individuals and as a team. 

 

Attract and retain exceptional talent across the Middle East and Asia with MCG Talent 
 
MCG Talent is committed to finding the best people for your organisation whilst representing your brand with integrity and respect. With over 12+ years of success, it’s no wonder we’ve been able to build an unmatched network of recruiters that always deliver – whether it’s contingent, retained, or project-based; both with fast-growing start-ups, as well as industry giants.  

With offices in Dubai, Hong Kong and Singapore and soon opening in Riyadh, we offer unique insight into the trends shaping recruitment in the region and can provide tailored advice and services that make sure your business can access the talent and skills you need. 

Contact MCG Talent and connect with a consultant today!