Why increasing the wages of ‘new hires’ can disadvantage existing staff

According to a study by recruitment agency Robert Half, employers are offering candidates higher pay in order to secure talent for in-demand roles. Senior managing director of Robert Half Asia Pacific, David Jones, said this can have a negative effect on relationships with current employees.

“Talent shortages have put pressure on employers to offer new recruits higher pay in a bid to stay competitive in the market, but this response can stir concerns among workforces,” said Mr Jones.

“Waiting for a tenured or loyal employee to identify and raise concerns over pay inequity before responding is likely to erode the trust, loyalty, and engagement of the employee at hand and creates the risk that they will already be half way out the door before their concerns are addressed,” he explained.

According to the research, 93 per cent of Australian companies are increasing starting pay by an average of 19 per cent to secure talent. Meanwhile, 65 per cent say their existing employees have voiced concern over unfair pay differences between themselves and recruits.

Mr Jones continued: “Businesses that are serious about retaining their staff should be regularly benchmarking salaries across the organisation and maintaining a clear and transparent dialogue with each of their employees about their salary and role expectations.”

“Ensuring existing staff are rewarded at the same rate as new employees could significantly reduce the risk of losing crucial knowledge and experience to more competitive external offers,” he said.

It seems most are listening to the concern of their existing workforce, as 72 per cent of businesses agreed to raise wages of current staff to calm fears of inequity. However, 31 per cent of workers still believe they are paid less than recruits in similar positions.

“In addition to making sure salaries are both competitive and fair for all employees, employers should also look beyond remuneration for ways to attract and retain employees in a tight talent pool,” said Mr Jones.

“Companies would benefit from re-evaluating the entire employee experience to build talent acquisition and management strategies that satisfy employees’ personal and professional needs in a modern market. Specifically, career advancement and flexible working arrangements including remote working are two top priorities for workers today.”

According to the Robert Half survey, organisations are taking steps to address inequities in pay. Fifty-nine per cent are changing the wages of current staff and conducting audits to recognise issues, while 54 cent are paying employees on their ability, rather than how long they’ve been with the company. Forty-nine per cent are listing a salary range when advertising new positions.

Read the full Robert Half report here.