It's challenging times for employers, with record-high levels of employee turnover, shortages of skilled staff in a tight labour market, low unemployment, and wages rising to keep pace with surging inflation.
Small and medium-sized enterprises (SMEs) may find it harder to compete with the deep pockets of large corporations, but there are plenty of advantages SMEs have in being able to attract and retain talent by tailoring creative, meaningful remuneration packages for each employee.
Here are some key tips:
Look beyond the pay packet
While you want to keep salaries in line with market rates, if possible, there are many other things that are just as, or more important, to people. Can you offer a better work-life balance, career progression, or a vibrant, inclusive workplace culture?
The good news? It’s not all about the money. We often talk about pay being a ‘basic hygiene’ factor for businesses, in that you don’t want to get it wrong, but there are many other things that are just as, or more important, to people.
Recent research by SEEK showed work-life balance was the top priority for many Australian workers and flexible hours or schedules came in at #2, ahead of salary and compensation.
These findings are backed by LinkedIn’s Workforce Confidence Index, which found flexibility was the deciding factor for 37% of workers searching for a new job, followed closely by workplace culture at 36%. Only 23% of workers gave salary as the critical factor.
You want to keep salaries in line with market rates, if you can, and ensure those rates stay in touch with regular salary reviews. If you are having trouble benchmarking pay rates and benefits that are specific to your industry, reach out to experts for help.
Personalise your offerings
Everyone is different, so you should determine what benefits and support are meaningful to each employee. Put simply, it’s about applying a “tell us what you want and we’ll do our best to make it work” approach to remuneration.
You might not be able to compete with larger companies' pay packets or cash incentives, so get creative with your range of offerings. One person might want a gym membership or equity via a profit-sharing scheme; another might value extra training opportunities or more leave. It’s also worth investigating things like unconventional new parent policies, that go beyond simply topping up parental leave payments.
Employees’ needs also change over time - a quarter of workers surveyed by PWC for their Future of Work report said the reasons they joined an organisation weren’t always why they stayed - and the agility of smaller businesses means they can keep reevaluating and adjusting benefits to match expectations.
Support and trust your staff
Establish a solid basis for each employment relationship and match expectations with action. This builds trust and confidence, which flows into higher motivation and employee retention.
No one likes to lose talented people and the impact is even more acute for SMEs. Productivity in a big corporation might not be badly affected by the loss of a few employees, but losing 3 people in a business of 15 employees means you are down 20% of your workforce, which is serious, particularly if a single person holds a required qualification or certification, e.g. a bar manager’s certificate.
We can’t stress enough how important it is to support your people and get the basics right from the start. Establish a solid basis for every employment relationship by ensuring all the legal aspects are locked down and do what you say you will do, from the hiring process on. Set performance expectations, get onboarding right, and ensure people can raise any issues. This all builds trust and confidence, which flows into higher staff retention.
The COVID-19 pandemic provided graphic evidence of what supporting staff looks like in practice, with 2021 research by recruitment agency Randstad finding employee loyalty increased in companies that kept people employed and working remotely, and ensured their health and safety.
Flexibility is key
Research shows that work-life balance is now top of mind for employees, and flexible work arrangements and remote working is now expected by many, at least some of the time.
Many companies are responding by offering a hybrid work model, where people come to the workplace some days and work from home on others (don't forget to ensure the remote work environment is as well-equipped and safe as the workplace). Small businesses also have an advantage in being able to pivot more easily than a large organisation, much like a speedboat can change course quicker than an ocean liner.
We’ve seen many SMEs respond nimbly to the challenges of the pandemic, while some big businesses went into full panic mode and restructured, often multiple times. This all speaks to having a small team of talented people who are committed to the business and are adept at changing ways of working to make the most of opportunities.
Build your mission and culture
Small businesses are often run by passionate people and the ability to articulate a clear vision of why you are in business and what you are aiming for provides clarity and purpose for employees who know how they can contribute.
Research proves that people now want to work for an enterprise that does good, with Randstad finding that 75% of current and potential employees want to work for employers who have a clear social conscience.
Dynamic team culture is another thing SMEs often excel at. Colleagues don’t all have to be best mates, but little things add up, like having team lunches, organising small events, or celebrating achievements.
Also, don’t overlook the impact of poor performance or conduct, and when you need to take disciplinary action or restructure, ensuring you manage these processes swiftly and ethically will be a positive thing for the overall company culture.
Connection, recognition and security
Nothing beats genuine human connection and social interaction, and SMEs have a unique ability to build thriving employee relations for the simple reason that there are fewer people. No one gets lost in a small business.
Regular performance review discussions are a vital way to connect to your employees, so you can accurately track, recognise, and reward high performance (or look for constructive solutions to under-performance). Honest lines of communication between employer and employee mean you can better understand staff needs or convey changing business needs, and can then work together to formulate responses.
Job security can be another edge over the large corporate culture that too often values perpetual restructuring to the detriment of employee engagement, motivation, and company culture.
Providing opportunities for internal career progression also gives people a long-term view of their future in the business.
You’re not alone
In a small business, people are typically performing multiple roles. Owners, too, often have to be “on the tools” while managing and developing the business. So, sometimes these important hygiene factors, or people and compliance issues can get parked or overlooked.
It doesn't have to be this way: if you don’t have the time or expertise, help is out there.