Culture trumps salary in the race for talent nowadays.
That’s the shift Dave Smith has seen the last few years among employers in West Michigan as unemployment rates steadily declined and the labor market tightened.
While a few years ago members of The Employers’ Association used pay as the main lure, today there’s more of a balance between wages, pay equity, and cultivating a workplace culture that attracts people and keeps them on the job.
“Four or five years ago, people thought they could just deal with it with pay. They can’t,” said Smith, CEO through the end of 2018 at The Employers’ Association, a Grand Rapids-based human resources association that just published results from an annual wage and salary survey.
As employers take a more strategic approach to compensation and talent issues, Smith has done more compensation plans in 2018 for members and more employee-engagement surveys that look at workplace culture than he’s ever done in his 29 years at the association.
“They’re changing their focus a little bit to the long run, recognizing it’s hard to find talent now but you’re not going to buy it because it’s going to leave for another opportunity unless an employee can feel vested, appreciated, and listened to,” Smith said. “Companies are starting to say, ‘We can’t just buy talent.’ We have to look at our internal structure, make sure we’re being equitable with pay. We have to recognize what the market is, but we have to have a way to explain internal growth to candidates … and what can they expect if they do move there.”
The shifting focus continued as average pay increases for 2018 in West Michigan ranged from 2.5 percent to 3.5 percent on average, according to The Employers’ Association. A prior survey in the summer indicated employers planned the same increases for 2019, with an overall average of about 3 percent.
The nonprofit organization, which focuses on HR services for members, this year received survey responses from 262 employers in an array of economic sectors, all within a 60-mile radius of Grand Rapids. They collectively employ more than 37,000 people across a variety of positions. The survey covers 343 specific jobs within 16 “major job families,” such as all accounting positions, production jobs or engineers.
Some positions and classifications outperformed the average pay raises for 2018 and some came in below average. Pay increases this year for a tool and die maker, for instance, increased on average 4.9 percent to $20.78 per hour, and pay for a job classified as a “production helper” increased 4.6 percent to $14.27 per hour.
On the other end of the spectrum, the average pay this year for a manufacturing/process engineer II increased 1.2 percent to $76,521.
“Idea generators” in business and top management positions got pay raises of 3 percent to 4 percent on average, slightly higher than mid-level workers who generally got wage adjustments in line with the cost of living, according to Smith.
“You just can’t ever look across the board,” he said. “West Michigan is really paying market rate for the jobs that we have.”
The results for average pay raises were skewed somewhat by retirements. As baby boomers leave the workplace, employers hire entry-level replacements that earn less, Smith said. That resulted in some positions actually recording decreases in overall average pay rates, although entry-level wages are inching upward at a slightly higher pace because of the tight labor market, he said.
“Companies have been losing people to retirement. Some of the more seasoned workers that are earning more — say an engineer — companies are replacing them with less-seasoned workers, sometimes two, at a lower pay rate. The average appears to be down, but it doesn’t mean we’re paying people less,” Smith said. “When we look, West Michigan is creating a lot of entry-level jobs, so average pay rates may be low, but it’s because the jobs are newly created as opposed to highly experienced.”
As has been the case the last few years, employers continue to report difficulty finding qualified workers in a tight labor market.
Statewide unemployment as of October was 3.9 percent, according to the Michigan Department of Technology, Management & Budget. That compares to 4.9 percent in October 2017.
Regionally, unemployment was 2.6 percent in October for the Grand Rapids metropolitan statistical area that includes Kent, Ottawa, Barry and Montcalm counties, versus 3.3 percent a year earlier.
As the labor market tightens, employers are trying to get more creative in their approach to recruitment and retention, said Maggie McPhee, director of information services at The Employers’ Association.
“They’re just trying to figure out ‘how can we make you happy? How can we keep you here?’” McPhee said.