Finding new employees remains a challenge for many small businesses during the current labor shortage. In this article, discover tips for adapting your hiring strategy and staffing your business in 2022 and beyond.
Much has changed since the unemployment level reached its record high of 14.8% in April 2020.1 Millions of people who had been sent home at the start of the pandemic have been asked to return to work. Others watched their jobs fade away as their employers were forced to close their doors. In the labor market at large, there are 10.4 million open jobs, but businesses of all sizes are struggling to meet staffing needs as the U.S. economic recovery continues and consumer demand surges.2 Currently, a record 51% of small businesses report having jobs that they cannot fill.3
If you are a small business leader facing these challenges, there are several ways you can approach staffing shortages. In this article, read about small business hiring strategies that you can use to attract new talent to your business in a difficult labor market.
What Is a Labor Shortage and How Can One Affect Small Businesses?
The widespread staffing difficulties that businesses are currently experiencing are the product of a nationwide labor shortage. A labor shortage is characterized by a supply demand imbalance between outstanding job vacancies and qualified employees who can and are willing to fill them.
One of the primary factors driving this shortage is the economic concept called “search friction.” With the economic boom prior to the pandemic, many people were able to put away enough money to see them through a lengthy job search. That’s a friction. Others received a degree of public support during the pandemic that allowed them to delay their re-entry into the job market. That’s another friction.
As the pandemic continues to have a lasting impact on the personal and professional priorities of workers in the current labor market, many employees are also reevaluating their current roles and leaving their jobs at record rates. The Great Resignation (or Big Quit) is real, and it presents additional staffing challenges for small businesses. Some estimates suggest more than 40% of the global workforce is considering a job change.4
With search frictions limiting the availability of qualified candidates and the Great Resignation impacting employee retention, many business owners have been forced to operate understaffed as industries rebound and customers return to the marketplace. And while businesses of all sizes feel the impact of labor shortages, the effects are often concentrated on small businesses, which rely heavily on customer service, on-time deliveries, and consistent operating hours.
The lost productivity from unfilled jobs and the high cost of replacing employees can meaningfully impact your bottom-line. But there are ways for small businesses to adapt and find success in a challenging labor environment.
What Can Small Business Owners Do to Attract New Talent During a Labor Shortage?
Re-evaluating your hiring strategies can be a great way for small businesses to beat a labor shortage. Focusing on your existing employees is important, but sometimes, retention alone is not enough. To meet their staffing needs, many small businesses may need to enter the hiring market with more creative and meaningful tactics to recruit top talent.
However, small businesses owners looking to implement an effective hiring strategy today must recognize that recruiting practices have changed over the course of the pandemic. Businesses must adapt to new and evolving employment trends to remain competitive in the labor market.
Here are eight ways that small businesses can adapt their hiring practices to attract new talent:
- Recruit locally. Searching for talent near your business can greatly enhance your hiring capacity. By recruiting from counties that are 10% closer to your business, you can find 44% more people already commuting to your location.5 With many prospective employees now prioritizing shorter commuting times, this strategy will be increasingly important moving forward.
- Adjust salaries/wages to the cost of living. Real earnings have decreased this year according to the Bureau of Labor Statistics.6 To attract new employees to your company, do what 63% of small businesses have done and bump up compensation to match the cost of living.7
- Be creative with benefits. While small businesses may not be able to offer the benefits of a larger corporation, they can remain competitive by offering sign-on, referral, and performance bonuses, and tuition credits. Businesses can also offer fun, low-cost benefits like free premium coffee stations and bring your pets to work days to enhance their workplace culture.
- Offer remote work options. The recent Digital survey reveals that 37% of those resigning their jobs are doing so to find indefinite remote work.8 Offering this option to prospective employees would go a long way towards helping you reach into the job market and win talent from competitors.
- Partner with adult and child daycare centers. The pandemic has created new burdens for working parents. Invest in childcare resources for your employees. You will be able to attract new workers who might otherwise be unable to rejoin the workforce.
- Hunt for jobseekers where your competition does not. Expanding the talent pool can be a great way to find new employees in a labor crunch. Get creative and look for employees in new places, including local job fairs, churches, and other community organizations. Older workers are also vastly underemployed and can bring great experience to your business.
- Prioritize COVID-19 safety. Businesses that adopt clear safety guidelines and invest in preventative measures for COVID-19 can provide a safe environment for their employees in the workplace.9 Demonstrating this commitment to worker health is a critical step towards attracting new talent as many businesses gradually return to in-person work.
- Promote your values and demonstrate how your business supports them. Workers are increasingly expecting the companies they work for to demonstrate a commitment to social and environmental justice. Environmental, social, and governance (ESG) criteria are emerging as important considerations for many prospective employees when evaluating potential employers. By clearly articulating how your business is advancing ESG values, you will appeal to a wider range of talented applicants.
It is too soon to tell how long the labor shortage will last and hiring will remain difficult for all businesses as they adapt to a new employment environment that has been irreversibly altered by the pandemic. However, businesses that take steps to improve their recruiting strategies will be better prepared to compete for talent and position themselves for long-term success in the labor market.
To discuss additional strategies for revamping your hiring strategy and accelerating your business recovery, contact your Senior Relationship Banker or get in touch with Santander Bank today.
1. Congressional Research Services, “Unemployment Rates During the COVID-19 Pandemic.” Accessed November 3, 2021.
2. U.S. Bureau of Labor Statistics, “Job Openings and Labor Turnover Summary.” Accessed November 9, 2021.
3. NFIB, “Small Business Optimism Slips in September as Labor Shortages, Inflation Impact Business Operations.” Accessed November 9, 2021.
4. Microsoft WorkLab, “The Next Great Disruption Is Hybrid Work – Are We Ready?” Accessed January 11, 2022.
5. Journal of Labor Economics, “Space and Unemployment: The Labor-Market Effects of Spatial Mismatch.” Accessed November 3, 2021.
6. U.S. Bureau of Labor Statistics, “Real Earnings Summary.” Accessed November 3, 2021.
7. NFIB Small Business Optimism Index, “September 2021 Report: Small Business Optimism Slips In September As Labor Shortages, Inflation Impact Business Operations.” Accessed November 3, 2021.
8. Digital, “Why are Workers Quitting? 1/3 are Starting Their Own Businesses.” Accessed January 11, 2022.
9. University of Chicago, Working Paper No. 2021-51, “The Backward Art of Slowing the Spread? Congregation Efficiencies during COVID-19.” Accessed November 3, 2021.
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