What difference a year makes. Back in April 2020, Americans lost a record 20.5 million jobs as the COVID-19 pandemic raged and shut down many businesses. The unemployment rate rose to almost 15 percent—the highest it’s ever been since World War II.
This year, as the economy tries to recover, almost 10 million jobs became available in April. However, a lot of businesses struggle to fill the vacancies. Around the same time, about 4 million people decided to quit their jobs, according to the Labor Department.
The reason is a combination of several factors. Those who lost their jobs during the pandemic might have already shifted to becoming self-employed, running their own company, and being their own boss. Others might have used the lockdown as a moment of self-reflection and ultimately realized they deserve better pay and a better working environment.
The situation right now is good news for the labor market—not so for hundreds of companies, particularly small ones. After all, the lack of employees can translate to higher costs.
The Costs of Labor Shortage
With a tight labor market, companies need to brace themselves for a higher cost of wages. The reason is simple: the law of supply and demand. Because the demand is high, but the supply is low, the cost of acquisition goes up.
Currently, the average hourly rate is $12, but a growing number of employees may choose to look for a job that can offer at least $3 more. Although that doesn’t sound a lot, one only needs to do the math to see the financial impact in the long term.
Companies may also need to compete among themselves to attract talent. One of the areas where they can do so is through benefits. The COVID-19 pandemic highlighted the importance of having a healthcare plan, which means more employees may seek businesses that can offer an affordable or free health insurance policy.
However, as early as last year, some employers already reported a hike in their premium rates between 3 percent and 4.5 percent. To reduce that, workers should seriously consider taking a higher deductible or co-pay.
There’s also the cost attributed to retaining and replacing those who left. According to Gallup, replacement costs in the United States could already reach a trillion dollars. It could also range from 25 percent to 200 percent of the job’s annual salary.
Productivity and efficiency are also more likely to suffer from a poor candidate turnout. In manufacturing, for example, the skills gap could increase overtime costs by at least 5 percent. However, overworking can lead to employee burnout, and that will only increase the risk of turnover.
How Businesses Can Attract and Retain Talent Post-COVID
Small businesses are going to face plenty of challenges in retaining and attracting talent, but they can take a lot of steps to increase their chances of succeeding:
1. Work with Experts
Many self-employed individuals take on multiple roles, including that of human resources. Hiring an employee, however, isn’t as simple as checking their CVs and interviewing them probably once or twice.
Working with the HR services team ensures that employers can find the perfect worker for the job: someone who meets the qualifications, fits into the organizational culture, and aligns their values to that of the business. These are people who are more likely to stick around for a long time.
Moreover, a reliable HR company takes the time to study the market to understand what employees look for at this time and helps companies meet these needs.
2. Consider a Flexible Working Schedule
The percentages vary widely. A Harvard Business School survey this year revealed that an overwhelming 80 percent of the respondents don’t want to go to work full-time. Meanwhile, another survey, this time by Morning Consult, showed that at least 40 percent would consider quitting if asked to go back to the office.
Regardless of the numbers, the message is clear: the COVID-19 pandemic is making remote work even more popular. Fortunately, small businesses can use this to their advantage by offering a hybrid workplace. In this setup, employees now have the option to report to work only on certain days.
A hybrid model doesn’t fit all businesses, such as those engaged in retail. It also comes with some challenges. On the upside, it may improve employee productivity and decrease overhead costs. Most of all, it satisfies one of the current demands of the labor market, which is flexibility in their working schedules.
Picking up the pieces left by the COVID-19 pandemic won’t be easy especially for small businesses that often have to deal with limited resources. That includes attracting people to apply for jobs. However, with the right professional support and knowledge about the changing labor market, they can overcome this challenge.