Mercer: Companies must focus on flexibility, career growth path to combat high attrition, says Mercer’s Renee McGowan

The massive attrition problem that companies across industries are facing is prompting companies to offer high salary premiums to attract and retain talent. The danger is that it is pushing up wage inflation at a rapid rate, which may not be sustainable going ahead,
Renee McGowanpresident of the Asia, Middle East and Africa region at Mercer, said in an exclusive interaction with ET’s
Rica Bhattacharyya. “In the next 12 months we will see companies increasingly focusing on more holistic measures to attract and retain people – things such as flexibility, career growth path, healthcare and other benefits and organization culture will go a long way in engaging talent while delivering value to both employee and employer, ”she said. “It will be more of a lifestyle contract between employers and employees,” McGowan added. Edited excerpts:

Attrition is one of the major challenges that companies are currently facing in India as well as across the world. What are companies doing to attract and retain talent – especially in a market where there is an increasing shortage of skilled manpower?

Our global talent trends report that takes the views of employees and employers all over the world shows that attrition is a major problem companies are facing. In India, the attrition rates are extraordinarily high and in order to retain talented employers are relooking at salaries. We also see more employers using retention bonuses, particularly for key talent. On the other hand, salary premiums for new hires have risen to over 25% as companies try to attract talent. We are seeing greater instances in India and some other parts of Asia of sign-on bonuses – which is about 5-10% of annual salary. All of this is an attempt to attract individual employees.

Beyond compensation, what are the other measures in which companies are looking at retaining and attracting talent?
The danger of (giving constant salary premium) is that it is pushing up wage inflation at a rapid rate. However, globally one of the major reasons people are leaving organizations is a lack of career path. So the number one reason for employees to leave companies is not salary, it is the career growth opportunities that they are looking for. And as a result the key areas employers are looking at is flexibility in the way we work, benefits (the well-being elements), the culture in the workplace and then of course the career paths.

We found that a third of employees are willing to forego (higher) pay to get access to flexibility and other benefits and culture. So that’s a real big thing that employers can be doing but really haven’t started off to that extent yet. This is an area where we are going to see a lot more change in the next twelve months. Right now, companies are focussing on getting the right people for the right roles amid a massive attrition problem and as a result are willing to pay high salary premiums. But wage inflation cannot keep rising. We will see this level out as companies work out more holistic and sustainable measures of attracting and retaining talent.

What kind of employee benefits are companies focussing on at the moment?
Employers are going to move away from just focusing on compensation because that is a circle that goes on and on. Employers are looking at more holistic measures. It will be more of a lifestyle contract between employers and employees. Facilities such as affordable healthcare for individuals and their families, enhanced insurance cover, among others. Our survey in 2021 showed that nine out of 10 companies in India reviewed their benefit policies – insurances, access to flexible benefits, etc. There is a huge focus on engagement as employers want to constantly check in on their employees and there is more frequent pulse checking rather than just an annual assessment.

How do you see flexible work options evolving over the next 12 months? Several companies are offering remote working or hybrid work options – how much of this is here to stay for the long-term?
Data related to India in our Global Talent Trends study 2022 shows that flexibility is increasingly topping the list of employee expectations and will be critical towards attraction and retention but employees and executives see things differently. The study 80% of employers in India believe they have an apprenticeship culture where people learn working side-by-side, not remotely but 88% of employees believe their organization will be more successful with remote / hybrid working. About 91% of employers in India are concerned about the ability of employees to build solid interpersonal relationships with colleagues / leadership but 89% of employees believe their team collaborates well while some people are on-site and others are remote. About 76% of employers in India are concerned about the potential deterioration of culture but 59% of employees feel more connected to co-workers when working remotely. The study also found that globally females (52%) more than males (45%), as well as Gen Z (51%) more than baby boomers (45%) prefer hybrid / remote work, so employers need to be mindful of presenteeism bias.

Companies are working on the various types of flexibility – it is not just about work from home or hybrid work models but also things like working four day week or working on a Saturday and Sunday instead of Monday or Tuesday and various other flexible options that makes it more employee friendly, while also delivering maximum value to the employer. They are also trying to make the benefits more inclusive – whether one is single or married, living in a small or a bigger family. There is also a great focus on mental health and well-being.

There is a lot of uncertainty among employers about hybrid work culture and how they retain their culture. Just because we know how to work remotely and how to work from the office does not necessarily mean we know how to work hybrid. Organizations are really struggling and grappling with that a lot at the moment. There is no easy answer to this – so they have to do a lot of tests and learn. But we need to be careful that culture is very important in so many organizations.

On flexibility, our March 2022 survey of 370 global tech companies found that the majority of tech employers (45%) have begun their return to office with an additional 28% saying they have no plans to return to office in 2022. About 58% companies have implemented flexible schedules and / or working hours and 17% have mandated on-site days. In comparison, across all industries (about 500 respondents), 56% have implemented flexible schedules / working hours while 21% have mandated on-site days.

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