Skills shortages and pay rises in the IT sector
August 26, 2008
A shortage of technical graduates and off-shoring schemes for low level IT work are both to blame for skills shortages within the IT sector and rising salary expectations for mid to high level IT professionals, according to recruitment consultancies and Incomes Data Services (IDS), the HR research organisation. This situation is leading to a skills gap, where IT graduates cannot find their first position out of university because much of the entry level work is being outsourced to countries such as India or China, and therefore cannot gain the 1-3 years’ experience required for the roles that many organisations are struggling to fill. This has led to a reduction in IT graduate numbers – applicant numbers for technology degrees have fallen by 48% since 2001.
This is proving to be a big problem for technology related companies and IT departments, not only in sourcing good quality candidates, but also in retaining the mid-level staff, who have perhaps gained a couple of years experience with the company, and are now being enticed away by higher salaries elsewhere because their skills are so much in need. I have experienced difficulties in recruiting staff in this area with more than one year’s experience, yet I don’t have the same difficulties in recruiting new graduates. This isn’t too much of a problem as long as the company is able to provide the appropriate training and support to these staff, who may have never had a job before. All of the new graduates come with the necessary technical skills, but may need close supervision or strong direction in terms of company policy, client management or commercial awareness. Further down the line, it is necessary to be on the ball in terms of retention of these individuals that the company has put a lot of time, effort and money into, as there are so many positions out there and not enough people to fill them. I am constantly plagued by recruitment agencies that find out the names of key staff in my organisation, call them under the guise of a client, and then offer them interviews for jobs with sky high salaries that we cannot compete with. Fortunately most of the time the staff let me know when this happens so that I can contact the agency to complain, but I have lost some staff because of this problem. Understanding the needs and desires of existing staff to retain them is a continual effort, covering all aspects of the employment experience including salary and benefits, career progression, learning and development and general happiness/interest in the role. Here’s some more ideas on how to manage staff retention.
With the continuing decline in IT graduates and increasing pay requirements, companies need to be quite innovative in their approach to recruitment and retention in this area. If you have any advice or experience to share regarding this issue then please leave a comment.
Focus on non-financial benefits in difficult times
July 24, 2008
Yesterday I was commenting on the likelihood of pay increases being squeezed by organisations in the current difficult economic situation, and the probable backlash from employees in the face of this as their personal finances take a hit from each end with rising living costs such as food and fuel. Salaries are a very emotive subject and this often has an effect on staff satisfaction and retention (although it’s rare that salary is the sole reason for an employee jumping ship as it’s only one in a multitude of motivating/demotivating factors). So what can organisations do to ensure they retain their key staff and still attract new talent in the difficult times, when at the same time they’re under pressure from shareholders/the board to cut costs due to falling sales or rising outgoings?
If an employer is struggling to stay competitive on salaries, then perhaps one option is to concentrate on other aspects of the employee experience. As well known motivational theorists have told us, pay isn’t the most important factor keeping employees happy and committed to their organisation. The opportunity to develop and learn new skills, autonomy and the chance to work with inspirational leaders and within innovative teams are all reasons for employees to feel satisfied with their jobs. In terms of the package available for employees, introducing less costly benefits that have shown to be proven winners such as flexible working options or purchasing/selling annual leave can have as much of an effect on job satisfaction as a big pay rise or bonus.
It doesn’t all have to be doom and gloom for organisations faced with the task of cutting expenditure and even those dealing with redundancies; as long as the remaining employees are given a clear message; that the organisation still has a clear and positive goal, that the employees are a valued contributor to this goal, and that any financial issues leading to cuts are shared fairly across the company. In other words, it’s no use telling everyone that salary reviews or bonuses are going to be a lot less this year when senior executives are clearly receiving huge pay outs, which is something you read about quite a lot in the news. It’s no wonder people get hacked off with their employers when they see this happening when at the same time they’re struggling to pay for the fuel to get them to work!
Providing refreshments for your employees
July 4, 2008
I don’t know about you, but food and drink are two of the most important things in my life. Especially food! When I’m at work I’m unable to function or concentrate properly if I’m hungry, and I’m always snacking as I carry out my daily tasks. I was having a debate with a colleague the other day about whether employers have an obligation to provide refreshment facilities in the workplace, and the conclusion was that whilst there is no obligation (except perhaps clean drinking water?), providing food and/or drinks, or at least the opportunity to purchase them makes employees’ lives easier and consequently happier. For example, if the office is on a business park that isn’t near any shops, it is more convenient for staff to be able to purchase refreshments on site.
The most attractive option for employees would be the provision of a canteen on site. This would be even more attractive if it were paid for or partially subsidised, but even the opportunity to buy meals on site is something that would appeal to many. However, one problem with this option is that the provision could eventually become an implied term of the contract of employment, as I found in an example on the CIPD communities discussions. In this example, the firm that provided the catering withdrew their services, and the employer was advised that if they didn’t provide a replacement facility that this could amount to a unilateral variation of all employees’ contracts. So it could turn out to be an option that comes with a lot of hassle and expense.
Another option is to have vending machines in the building, and there are quite a few benefits of this option. Firstly, food and drink can be provided in a much smaller space than a canteen facility, and this is also a much cheaper option, as well as much less hassle as the companies that provide the machines manage the stock and deliveries. Of course, the food provided won’t be canteen style, but for companies that can’t afford this provision or don’t have the space, it’s a good alternative. A benefit of the canteen is that staff tend to spend more time getting to know each other over lunch if they all eat in the same place, but lots of places have a staff room where vending machines could be made available which might have the same effect. Vending machines have a reputation for only providing unhealthy snacks, but the providers will be getting wise to the healthy eating agenda and you can now see much healthier options in vending machines in lots of places.
Another point to consider is the growth in the fair trade industry, and how this links to the company’s social responsibility agenda. Many employees are now attracted to workplaces where the employer has an ethical and responsible approach to many things such as environmental matters, community development, and fair trade purchasing. It is possible to purchase fair trade tea, coffee, sugar etc for employees to make drinks themselves, or there are vending machine companies that also provide fair trade only machines. It might seem quite insignificant, but providing fair trade refreshments can make a positive statement about the ethical approach of the employer, and of course contributes positively to global trade in these products.
Providing refreshments for employees at work might seem like a small matter in the grand scheme of things, but I always feel that these little things at work make a big difference to the employee experience and their feelings towards their employer. It’s something that perhaps needs a bit more consideration than you would initially think.
Financial participation schemes
June 9, 2008
I’ve just read in the news that Asda are to issue a £37.5 million pay out to the 20,000 employees who participate in their save-as-you-earn share plan. Employees can save up to £250 per month, with the average being £43.
Financial participation schemes are quite common with large organisations such as Asda, and include other arrangements such as performance or profit related reward schemes. In one of my previous organisations, salary increases were related to the outcome of employees’ appraisals (there were four levels) and an overall ‘pot’ of money was made available relating to the financial performance of the organisation, which was then shared fairly across the workforce depending on numbers of employees with scores at each level. At the highest level an employee could receive around a 7% increase and a bonus of £1000, so it was worth the additional input to achieve the best appraisal outcome. Of course, the better the company did, the bigger the salary review pot was so again it was worth everyone’s contribution throughout the year. The only downside to this method was that some employees believed their managers made biased or inaccurate judgements on performance, so the system needed to be closely monitored and was updated to try to make it fairer year on year, with the help of employee feedback gathered using an evaluation exercise.
Another example of a financial participation scheme is the John Lewis Partnership, which is owned by its 69,000 permanent employees (“partners”). Early last year each employee received an 18 percent bonus as their share in the record profits made. The idea behind this arrangement is that by giving all employees a stake in the business and a voice, they will contribute more to the company and its customers, and to be honest, I’ve always had a great customer experience when shopping in John Lewis.
The purpose of financial participation is that employees gain a vested interest in the profitability of the company which encourages greater commitment and reinforces the aims of the organisation. Additionally, schemes such as shared ownership provide a means of disseminating important information to members through reports, updates and marketing material, so there are benefits for improved communication as well. Whilst it may not be something that many companies would wish to look into in the current economic climate, I think that some sort of financial participation scheme is certainly something to consider when looking for ways to involve employees more in the business. If the scheme is transparent and clear, it should motivate staff and give them a sense of value and importance as their contribution can be directly measured in one of the most important places – in their pay packet.
The complexities of company car schemes
May 28, 2008
There are many day to day headaches for HR or personnel professionals, and managing a company car scheme can certainly be one of them. There are many implications relating to the provision of company cars, including those relating to taxation, and health and safety legislation.
A company car is provided to an employee as part of their overall reward package. Usually, only employees with a need for a car in their work are entitled to this benefit, although sometimes the provision of a car is related to the employee’s level within the organisation or simply as a personal benefit to be used for private use rather than business. When a car is made available for private use instead of or as well as for business use, a tax charge is made to the employee (as long as they earn £8,500 or more per year). Generally, taxation is lower for cleaner and cheaper cars, to encourage more environmentally friendly options.
There are different ways in which to manage a company car scheme. Some employees prefer to receive an allowance in lieu of a car, and the payments are subject to Income Tax and National Insurance contributions in the same way as their salary. Whilst this can seem like an attractive option, the employee is still responsible for repairs etc, and some people prefer to have the comfort of knowing they are covered in the event of a break down, which can be built into the company car option. Another issue with the car allowance option is the responsibility for health and safety that is still on the employer for employees driving in their work, even if the car is bought and owned by the employee. It is possible that an employee will purchase a car that is not fit for purpose, whereas an employer has more control over the quality and safety of cars in a car providing scheme.
Companies can purchase company cars outright, which means the car then becomes a company asset, and the employer has to manage the scheme including administration, tax and insurance, and repairs. The trick with this is to work out the car makes that will provide the most value, i.e. which are low in tax, and which will retain the most value, as we’ve all heard the stories of cars that drop a massive chunk of their value the minute they’re driven off the car lot. Another popular option is business contract hire, where the company hires the car from a leasing company and pays agreed monthly payments. This option takes away all the administration of the scheme and there are different options for the inclusion or exclusion of insurance and maintenance costs, although the employer is still responsible for health and safety issues and should therefore have a clear relationship with the leasing company and a good health and safety/company car policy. This scheme means the company does not own the cars, but it does take away the issue of depreciation, and also means the costs of the company cars can be spread evenly across the year.
There are so many things to consider when trying to set up or manage a company car scheme, but one thing’s certain, you will need a lot of time and patience if this is part of your role!
Workers use their money for now rather than save for the future
April 1, 2008
A UK Stockbroker, Brewin Dolphin, has released findings from research which claims that one in ten workers will cut their pensions contributions in the next year to enable them to pay for rising mortgage fees and credit card debts. As the economic situation in the UK looks increasingly unpromising, the firm estimates that 2.4 million people will either stop or reduce their pension payments as they feel the pinch from interest rates, increasing credit debt and fewer borrowing opportunities. The most likely age group to stop their contributions will be 25 to 34 year olds. However, it is warned that even a short break in pension contributions could have detrimental effects on a person’s income in retirement. What is important to remember is that many occupational pension schemes include an employer contribution that will be lost if you stop your own contributions, and it is worth considering all available options before reducing or stopping this payment. Many employers provide an employee assistance programme which will normally include a debt advice line. If your company does have this sort of scheme, then use it before taking any extreme action in relation to your pension savings.