Vice President & General Manager, RPO, Global
Handcuffed by High Pay
The pay raises that some firms offered a couple of years ago were mouthwatering enough to make headlines; they also made a lot of people in a variety of sectors happy. But now, experts say, a lack of additional opportunities may cause many careers to stagnate.
The issue: people who leaped at lucrative offers are realizing that they can’t find equivalent pay and opportunities outside their existing job, because firms have seriously retrenched on salaries. And while the job market has previously seen gaps between expectations and reality, experts say they can’t remember another one as large and risky.
For example, only two years ago, engineers and software developers were fielding multiple offers at nearly twice their base pay. Today, they’re competing over a handful of jobs paying 30%—and sometimes 40% or 50%—less than they’ve been making. Jacob Zabkowicz, vice president and general manager of the Recruitment Process Outsourcing practice at Korn Ferry, says he’s seen a variety of roles coming in at $200,000 that paid $280,000 during COVID. “Times are different, roles aren’t paying that much,” he says.
Known as “golden handcuffs” in industry parlance, lucrative pay and incentive packages are extended to top talent to enhance retention and engender loyalty. Usually, these packages are reserved for senior executives and management, but the labor shortage and demand for properly skilled workers during the pandemic forced companies to offer outsized compensation to workers at all levels. Employees adjusted their lifestyles in accordance with those larger salaries, both expecting and relying on them. Now, however, insisting on the same compensation levels could derail a career, experts say. People are faced with a stark choice, says Zabkowicz: stay in their current lucrative positions and risk stagnating there (or worse, being laid off)—or take a much lower-paying role and try to level up.
During the pandemic, people were promoted faster and more frequently to fill holes in management caused by layoffs. That’s another factor contributing to the bid-ask gap in salaries, says Deepali Vyas, global head of the FinTech, Payments, and Crypto practice at Korn Ferry. Vyas says the accelerated pace meant some promoted employees lacked the skills and experience that would normally warrant higher compensation. “The market correction overall caused leaders to recalibrate and look harder at candidates who might not technically be worth what they are making relative to others in the space,” says Vyas.
Many roles and skills across industries are still commanding a premium, including those in tech. Overall, employee compensation costs rose 1.2% in March, the most recent date for which Bureau of Labor Statistics figures are available. “Employers are still feeling the pressure to increase wages in certain specialized areas,” says Christian Hasenoehrl, global account leader for the Consumer and Industrial practices at Korn Ferry.
To explain the danger for employers, Ben Frost, a senior client partner in Korn Ferry’s Products business, draws an analogy to NFL quarterbacks. Candidates across roles and levels, he says, believe their compensation will keep rising simply because they are “next in line.” For this reason, experts say that both hiring managers and candidates have to be very clear on their salary expectations. “Both sides have to have a little skin in the game,” says Vyas. She says that candidates need to be up-front about the minimum level of salary they’ll accept, and that managers have to share with their leaders the prevailing trends in compensation for top talent.
Similarly, Hasenoehrl advises employers to offset lower compensation by emphasizing other opportunities candidates value, such as personal training, development, and education. Stability, brand reputation, purpose, mobility, and a clear career path are all vital components to an overall compensation package. “Lots of people will take less money if they understand how to get to where they want to go,” he says.
For more information, contact Korn Ferry’s Talent Acquisition practice.