The current cost-of-living crisis is having a profound impact on businesses and employees in many countries, especially when it comes to hiring and recruitment.

Within the U.S., annual pay growth stalled at 3.3% in May; less than half the 9% increase of real-term prices, according to ONS. Inflation is a major problem in the UK with a similar outlook.

Despite the severe talent shortages and ongoing impact of the Great Resignation, companies are budgeting far less for 2022 salary increases compared to the rate of inflation. The potential financial implications that this can cause for businesses and employees can generate a ripple effect of issues.

For instance, the cost base for many businesses has increased exponentially in the last 12 months ranging from the cost of raw materials to increased borrowing rates. This results in a reduction of spending power and profit.

Parallel to this, the cost of living continues to rise, affecting the decisions a candidate makes. Many are requesting a higher base salary to offset both regional cost of living variations and the current cost of living squeeze.

This in turn, makes it difficult for businesses to find qualified employees they can afford. Often forcing them to offer increased salaries and benefits to attract talent. A financial strain that some companies are unable to sustain.

Treading sensitively

During negations it’s important to remember that the hiring journey can be emotional for candidates, especially in an economic downturn. But the lens a business looks through during the hiring process is different to that of a candidate, and history tells us that often, these inflationary economic pressures are short-lived.

As a leader it’s a precarious situation because the extra dollars to negotiate with that might have been available pre-2022 inflation rates are no longer available, and the levers that a company used to have to attract talent has gone, forcing businesses to make difficult choices.

But if a business is not careful, they are left with a high labor cost long-term, because of short-term decisions they felt forced to make.

Outsmarting inflation

There are however moves that both businesses and candidates can consider to outsmart the current economic situation.

As a business leader you can:

Make smart hires: invest only in talent that will make a fundamental difference to your business. Now is not the time to be hiring with a “carte blanche” attitude. Candidates with demonstrated and proven success will serve you well. Nice-to-have hires must wait.

Review and revise hiring strategies: When was the last time you audited the way in which you hire? Like most businesses you likely will have weathered high agency costs to hire talent. If you are fortunate to already have a structured team and process, how streamlined are the processes? When was the last time you trained your internal team? If you are confident in future growth projections, why not build a best-in-class internal talent acquisition team. Delivered well this can create significant cost savings.

Develop internal talent: Do not overlook your existing talent base. Oftentimes current employees are hungry for the opportunity to progress and if you know they are a ‘fit’ in terms of company culture and values already, supplying training for them to develop into a new role would significantly reduce the cost of searching for new talent.

Things to consider as a candidate:

A 360 outlook: Look at any offer holistically. This includes the cost of living within that area. Does the role allow for remote working? How does this organization propose to develop you? Are there other benefits that may not be directly financial, yet would make a difference to you either now, or in the short-to-medium term?

The long game: It is time to think smart; this should be a longer game plan that you formulate now. Putting pressure on a business as part of the negotiation may give you what you want in this moment (a high starting salary for instance), but what does this role and the organization offer you longer term? The contract development and manufacturing organization (CDMO) market has countless examples of growing leaders’ careers fast, due to the countless opportunities that exist in an industry that is expanding nearly 13% year-over-year.

The current cost-of-living situation is clearly having an impact on hiring. With financial burdens we must not forget that people’s priorities shift. As Maslow’s Hierarchy of Needs shows, ensuring that your family has food, and a home becomes priority.

As a business it’s important to remain in control of your boundaries when considering which investments you are willing to make. Get creative and take control of your hiring.

As a candidate, set a clear plan for yourself. Decide what is important now, and what can wait a while longer.

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Vector Partners was founded in 2021 by Neil Kelly, a talent acquisition specialist with extensive experience in the pharma CDMO sector. Vector focuses on building sustainable growth through creating the right talent acquisition approach to build the talent needed to drive businesses forward.
neil.kelly@vectorpartnersta.com; www.vectorpartnersta.com