Are Companies Paying Too Much for New Talent?

Workers want pay raises of 10% to switch employers, but companies are offering them 15% hikes: Gartner report.
David McCannAugust 27, 2019

Workers generally expect a significant bump in pay when they voluntarily switch employers. Employers understand that. But do job candidates’ expectations regarding the size of the pay hike align with what companies are actually offering?

No, according to recent research by Gartner. In fact, U.S. companies are paying quite a bit more than they have to in order to attract new talent.

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On average, employees expect about a 10% increase, Gartner said in its 1Q19 Global Talent Monitor. But companies are offering average raises of around 15% — and the negative impact may extend beyond the wasted cash.

“Not only are U.S. employers often paying too much to new workers, but once tenured employees discover discrepancies between their salaries and those of new colleagues, they may be inclined to look for a new position elsewhere,” said Brian Kropp, group vice president in Gartner’s human resources practice.

Indeed, employers’ generous compensation offers to attract new talent coincide with a rise in the number of employees actively seeking other employment. Gartner’s report indicated that almost 25% of U.S. workers were doing so in the first quarter, which was up 7.6% from the fourth quarter of 2018.

The higher rate in the United States almost equaled the global average of 27%.

The research also found that only 43% of U.S. workers expressed a high intent to stay with their current employers. That was down slightly from the prior quarter but well above the global average of 33%.

Additionally, the research found a 2.6% increase in business confidence among U.S. employees, compared with the fourth quarter of 2018.

Employees’ perceptions of the economy are primarily driven by how their company is financially performing and what they gather from news cycles, Kropp noted. That “can lead to gossip and uncertainty if the employer isn’t actively taking part in this inevitable dialogue,” he said.

He added, “Companies need to proactively communicate with their employees about the current business plan and what will keep the organization successful. By leading these conversations, employers can help diffuse any potential workplace issues that might lead valuable talent to go elsewhere.”