Companies battle to retain talent, as workers demand better salaries, conditions

Pressure on salaries is creating a new challenge for employers hoping to retain talented employees, as the so-called Great Resignation has also reached South African shores and is driving staff turnover.

This is making a compelling employee value proposition for workers returning to the office non-negotiable.

While South African employers expect average below-inflation wage increases of 5,4% for the next 12-month period, they are under pressure to find new ways to keep staff happy in a time of record labour turnover, says René Richter, managing director of Remchannel, a member of the Old Mutual Group.

She was reacting to the findings of the bi-annual 2022 Salary and Wage Survey, and pointed out that salary budgets are potentially no longer sufficient to meet evolving employee demands. Employees now face increasing costs due to escalating inflation, exacerbated by increasing fuel prices and food shortages due to the Russia-Ukraine war.

In addition, the South African Reserve Bank increased the repo rate by 50 basis points last week, the steepest increase since 2016, taking the repo rate to 4.75%. 

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Salary increases in line with inflation

According to Richter, the overall average lift to payroll prediction was 5.24% on a total guaranteed package basis across industry sectors for the next 12 months, compared to South Africa’s benchmark Consumer Price Index (CPI), which held steady at 5.9% in April. 

The survey indicated that the historical average CPI for 2021 of 4.5% presented a more positive view in terms of the differential, but employers need to be guided by the current information, which shows a worsening of the gap between increases and CPI. 

Therefore, the pressure on salaries is a new challenge for employers who want to keep and attract talented workers, while remaining competitive in an environment that requires them to deal with the effects of the pandemic that prompted millions of workers locally and abroad to rethink work and its role in their lives. 

The Great Resignation refers to a US-led trend of workers quitting amid the pandemic, opting instead for stimulus packages. South African workers are also looking for better opportunities and flexibility now.

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Why are employees resigning?

According to the Survey, that used a total sample of more than 618 000 people, 36.4% of the labour turnover resulted from resignations over the past 12 months, an average turnover rate of 17.7%, with just under 40 000 employees resigning from 82 companies.

“Resignations continue to the be at the highest levels of all the termination categories that we have seen over the past 10 years, despite the pandemic and the economic uncertainty,” says Richter. 

She says this untenable situation would force employers to reconsider their employee value proposition and retention policies if they want to retain their brightest staff members.

Reasons for resignation include:

• 19 % indicated that they left for better pay
• 53% indicated that they are leaving for a better working environment, improve career opportunities, or avoid a toxic environment citing bullying or harassment 
• 20% said they were leaving for greater work-life balance or to avoid burnout and/or stress 
• 8% indicated that they are emigrating.

While more than half of participant companies did not measure the replacement cost of staff turnover, the figure was staggering.

“Assuming that most are professional staff at an annual salary of R600 000 and that it conservatively costs 1 times annual salary to replace these workers, it would have cost these companies a staggering R23.9-billion,” Richter said.  

The Survey indicated that human resources professionals experienced the highest turnover.

“This impact on this crucial business function could be why the resignations are at a high percentage. Sales and marketing professionals were second in line, which could be attributed to the greater focus on marketing to ensure organisational growth.” 

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Returning to the office

Remchannel also conducted a snap survey to understand how employees feel about returning to the office after the state of disaster implemented by the government was lifted, and the results reveal a clear desire for a work-life balance, including working from home. Most of the participants (70%) implemented a hybrid working model and did not attempt to return to a pre-Covid office model.  

The survey clearly indicates that 35% of employees are not happy to be back at the office and 28% resist returning to the office model, even if it is a hybrid. Organisational culture and key elements, such as improved communication, trust and empowering workers are now a prerequisite for employees.  

“Staff no longer think about the consequences of resigning, especially if their skills are in demand. Most employees also believe that their productivity has improved working from home. This is the second-highest selection made by the participants in this survey and is directly influenced by the number one reason of less time spent travelling to or from work.”  

Fear of contracting COVID is relatively low on the list of concerns of returning to the office now. 

However, employers believe that while the pandemic forced a flexible model on them, it is not sustainable. The single biggest reason employers cited in this survey is the loss of culture and working relationships between team members, followed by challenges onboarding new staff. 

“While these are certainly valid concerns, perhaps the question should be how the flexible work model can be adapted to overcome these challenges. Organisations should invest in exploring what critical competencies employees will need to collaborate digitally, and they should be prepared to alter and improve employee experience strategies to remain competitive,” Richter says.