5 REASONS WHY ORGANIZATIONS SHOULD MONITOR THE LABOR MARKET
The labor market is constantly changing and evolving. It changes to reflect demands and pressures from different sectors, industries, and locations. New jobs emerge, old ones disappear, and wages fluctuate—sometimes due to external forces and local or regional economic factors. Organizations must stay on top of trends and monitor the labor market to remain competitive. Those that don’t keep up risk being left behind and failing to meet the needs of their people.
One way for organizations to stay ahead is to monitor the labor market. Doing so helps human resources (HR) teams understand how their organization is affected by market movement. Reviewing and interpreting labor market data allows HR teams to address critical questions such as:
- How can we determine how much the market pays for similar roles?
- How can we competitively position ourselves against our target peers?
- How can we become an employer of choice in the local labor market?
Keeping an eye on the labor market enables organizations to make informed decisions about hiring, pay management, employee benefits, retention strategies, and more.
This blog post will explore why organizations should track the labor market and how to do so effectively. When the organization knows what is coming, it can plan and ensure it is well-positioned when the opportunity to grow strikes.
Establishing market composition and position
Using labor market data can help organizations clearly and consistently establish their competitive strategy, notably their:
- Target composition, or which group of employers are similar and more relevant to the organization. Consider organizations from the same sector, employers you lose your staff to, and organizations you often hire staff from.
- Target position, or how competitive an organization wants to be. Identify the ideal percentile (e.g., 50th, 75th) of the labor market the organization wishes to attract.
Determining its target composition and position enables an organization to understand where it stands against key employers in the market. It also guides the organization on what it needs to do to lag, match, or stay ahead of relevant comparators. Organizations must consider their compensation policies and budget to establish their target composition and position.
Labor market data also gives up-to-date insights into benefits widely provided in each country. In addition to salaries, benefits come in the form of cash (allowances and bonuses), in-kind benefits (company bus, gift baskets, company products, etc.), and non-salary benefits (retirement plans, healthcare coverage, family benefits, and leave provisions).
As the organization reviews compensation and benefits surveys, it can easily identify mandatory, cultural, and market practice benefits, as well as benefits that address local hardships. And while salaries often attract key talent to an organization, benefits make up a significant part of the compensation package in developing markets. By providing the proper compensation and benefits, the organization can remain competitive and retain talent.
Identifying HR gaps and making the necessary adjustments
Identifying the gaps in HR practices is another way organizations can benefit from monitoring labor market information. Some of the few questions that organizations will want to address are:
- Do our hiring rates remain competitive?
- Are we able to retain the talent we need?
- Are our employee benefits competitive in the market?
When the organization encounters talent management issues—such as challenges in attracting the right talent or holding on to staff—it may be time to make adjustments to the compensation package.
If the organization is looking for data scientists—but hasn’t found suitable candidates—it may be time to rethink the starting salaries to ensure they are comparable to other organizations hiring for a similar job. Or perhaps the organization starts to lose staff after some time. It may need to reassess policies on pay movement, benefits packages, or career advancement to entice staff to stay longer.
Understanding the impact of the data
Organizations need to go beyond the labor market data. They must understand how changing HR policies and practices in reaction to emerging trends, shifts, and volatility affects staff. So, the question that needs to be addressed is: Do the organization’s policies and initiatives reflect labor market changes and demands?
A recent example would be the shift from working at a traditional office to working remotely or in a hybrid format. After years of being accustomed to working from home (in response to the COVID-19 pandemic), employees now expect flexible work arrangements—so much that they are willing to leave the organization if it does not offer the option.
Another example is managing dispersed teams. With many employees now preferring to relocate to places that are sometimes far from the office, how will adjustments to compensation and benefits affect staff based in different areas? Should organizations still base salaries on city rates or adjust them based on where the staff chooses to relocate?
Thus, organizations need to use labor market data and its implications to help inform their policies. Other key questions that organizations need to answer when looking at labor market data include:
- Is our compensation program reaching the talent we need?
- How can we maintain our relevance in the labor market?
- Are there opportunities for improvement?
- Will changing our policies and practices help or hurt us?
- What are the implications of these changes on staff?
Managing compensation even through uncertainty
Now more than ever, organizations need to closely monitor the market. With inflation rising in countries across the globe, employees need to know that their employer has a plan to help them get through turbulent times.
Organizations can best manage economic turmoil by monitoring the labor market coupled with a special measures policy. When volatility happens, chances are employees are going to ask HR how the organization will help their families manage their day-to-day expenses. When market conditions warrant adjustments to compensation, this is easily defensible when you have the market data to support it.
When unpredictable events such as economic volatility, natural calamities, armed conflict, and periods of unrest affect the regular dynamics of the labor market, organizations must keep participating and monitoring labor market movement. By doing so, the organization can determine proper triggers, based on data, that would justify changes to compensation and benefits, as well as the frequency to which adjustments are made.
Bottom line: Know where you stand
The labor market continues to shift. It may be difficult for organizations to keep up as the market relies on changes from other sectors of the economy and events from around the world. As such, it is critical to keep track of the ever-changing landscape. This ensures that organizations adapt and adjust policies and measures to meet new demands, positioning themselves for success.
To do this, organizations need up-to-date data about the labor market to know what conditions are like in their area. Tracking the labor market through salary surveys can offer helpful insight into emerging trends that could impact the organization. Monitoring will help employers understand current conditions to make informed decisions about jobs, the market, and skills and performance. In the end, keeping one’s eyes on the labor market helps organizations stay competitive.
Does your organization need labor market data, especially on developing markets? We at Birches Group offer the most comprehensive salary survey coverage, with data on over 150 countries. We survey markets of varying sizes and focus on leading employers that set trends. Get in touch with our consultants to get started.
Carla is a part-time copywriter in our marketing team in Manila. Before shifting to freelance writing in 2020, she worked as a marketing and communications specialist at the offices of EY and Grant Thornton. She has written about HR and career development for Kalibrr.
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