How are employers handling the budget crisis?

In the never-ending battle to recruit talent, and as employers face a steady turnover of employees, new research from Robert Walters, a recruitment consultancy firm, says almost half (48 per cent) of employers face a budget crisis. Employers surveyed in the research cited budget constraints as the primary challenge in hiring the right talent. To put a band-aid on the wound, so to speak, 71 per cent of Canadian employers have opted to hiring underqualified talent due to such budget limitations.

Additionally, despite 70 per cent recognizing that their compensation packages are not competitive, 81 per cent of employers surveyed feel the need to hire better qualified candidates to relieve burnout for current employees. "This obviously has a massive knock-on effect on the business and their current teams and employees," said Megan Gallagher, a senior consultant at Robert Walters, highlighting the broader implications of such hiring practices.

"If you're not willing to put that time and that money into [underqualified hires], it's ultimately a waste of a hire in my opinion, because they're just going to feel like they're not getting the time they need to get up to speed and get the development and training that's required to get them to where they need to be," Gallagher added.

Gallagher asserts that if employers need to hire for a particular talent, bringing somebody in who's “not ticking all of the boxes” is just going to have a horrible knock on-effect, leading to burnout, and stress related issues in the workplace. “[Employees] will ultimately have to take on that workload until that person gets up to speed.”

While 37 per cent of employers are willing to invest in training underqualified hires, this approach may not be the most efficient use of resources, said Martin Fox, managing director of Robert Walters Canada. “Allocating budget towards hiring well-qualified talent from the outset could be a more strategic investment, potentially saving time and improving overall performance. This not only affects the overall performance and growth potential of the business but also places undue stress on existing employees,” he said in a release.

In Toronto, the 2024 operating budget shortfall of $1.5 billion is creating a challenging economic environment, affecting consumer spending and business investments. This has led to reduced recruitment budgets, limiting companies’ ability to offer competitive salaries. Nationally, salary growth has slowed, with planned increases of only 3.5-4 per cent in 2024, down from 4.1 per cent in 2023.

High competition is another critical factor as companies with limited budgets often find themselves competing against market rivals that can offer more attractive salary packages. As Gallagher points out, candidates tend to go with their competition that has the money to meet their salary expectations.

“People are a little bit more risk averse. Their guaranteed income is more important to them than a discretionary bonus or a pension contribution. That’s not to say that they're not important factors. But I think baseline salary is a good indicator as to what their total comp is going to look like. If you can't get that up to market, that's going to be an issue,” she said.

However, it's not all about salary. Gallagher emphasizes a holistic approach to attracting and retaining talent. "While salary is still the number one priority for most candidates, looking at things holistically is essential," she said. This includes investing in areas that may not require significant budgets, such as flexible working arrangements, employee well-being initiatives, and creating a positive workplace culture.

"I've worked with candidates who would take a bit of a haircut on their salary if they got to work with a really established, recognized brand that is known for being a great place to work," Gallagher added.

Rather than working to get the adequate budget allocated to hiring, employers are often already trying to work within the budget that they have, Gallagher explained. “Obviously that just means going through a list of, what are the requirements? What is absolutely a non-negotiable, and what can we sacrifice here? It can be tough to get budget approval, but it is a return on investment, and a long-term gain. Ultimately, it’s for the better good of the business.”

Gallagher reflects on the post-COVID hiring surge, noting that many companies rushed into volume hiring without much strategy, leading to subsequent layoffs and restructures. Now, in 2024, businesses are more cost-conscious and mindful of where their spending is going.

Going forward, she recommends hiring managers conduct thorough research and gather the necessary data to justify their hiring needs. "Get the statistics you need to pitch for the talent you need to hire," she said. “Reassess and adjust hiring budgets to reflect the qualified talent that you’re looking for.”

Gallagher remains optimistic about the future. She believes that while the current budget constraints pose significant challenges, the job market is cyclical. "When a downturn comes, the upturn does always come around eventually. It’s just a matter of when," she stated. Gallagher expects that by early next year, the market will start to see positive changes as businesses adjust their strategies and invest in long-term solutions. "The conversations I’m having with clients and candidates show a high level of optimism," she added.