• Scott Cullen, Partner |
5 min read

With record job vacancies in the UK and beyond, talent shortages were a significant issue in the second half of 2021: the ability to attract and retain employees is set to be one of the key challenges to businesses in 2022.

There are well-known external factors impacting shortages:

COVID-19 - has had multiple effects:

  • ongoing illness and self-isolation taking people out of work;
  • lockdowns which prompted a large number of people to re-think what they really want from their careers;
  • accelerated digitalisation of businesses creating even stronger demand for digital talent;
  • companies that reduced or froze headcount now struggling to get back up to speed; and

Brexit – has reduced the number of foreign workers in the UK and, in particular, had a significant impact on the availability of low paid, unskilled and semi-skilled labour, causing issues in agriculture, logistics, construction, hospitality, healthcare and related industries.

No business or industry is immune to these pressures, but some companies in the same industries fair better than others. Why is this?

At a recent seminar, we asked people for one reason why they would leave their current role. The top 3 responses were:

  1. they don’t feel that their contribution is appreciated (58 percent);
  2. they can’t see a way to progress their career (23 percent); and
  3. they hadn’t had a pay rise for 2 years (8 percent).

All of these responses are focussed on the worker’s experience at their current organisation. Only one (the smallest) is about pay, but even then, it isn’t about being tempted by a higher offer from elsewhere. Leaders really do need to take some responsibility for attrition rates.

What can companies do about this? Some of it is about getting the basics right, some is about small targeted tactical changes. Other responses are more strategic and longer-term

Recognising contribution

There are lots of ways to recognise someone’s contribution from a simple thank you, taking the time to explain what they have done well (and potentially how they could improve even further), discussing progression, annual bonus or a more formal recognition scheme.

We have seen a trend to increase the use and size of recognition schemes, and around 45 percent of companies state that they use formal or informal recognition schemes to help retain employees.

Some progressive organisations have started moving money out of annual bonus and into in-year payments, allowing for really meaningful awards. I expect this to be a growing trend.

Career Progression

This has long topped surveys in terms of driving retention. Around 45 percent of companies state that they are improving the process around communicating careers to aid retention.

There are some key ingredients to communicating careers well:

  • Having effective people structures in place - as a minimum, a grading structure but ideally a career architecture (e.g. a definition of job families and sub job-families) both with a description of differences in competencies or skills between levels and job families;
  • Technology to host these structures – the options have dramatically improved over recent years;
  • A culture that encourages career discussion and movement between different parts of the business; and
  • An understanding of what skills are needed by the organisation and a plan for how to bridge the gap and improve it by training (re-skilling) the existing workforce. This has a double whammy of providing skills in short supply in the market and providing career development


Once again, having effective people structures in place is key to helping organisations differentiate the noise from the real pay issues. You are unlikely to be able to throw endless pots of money at the issue, so choosing where to invest is critical. Some companies are putting in key skills allowances, particularly for digital employees.

Pay increases

This is a tough area for reward professionals as pay review budgets are often relatively low and many companies expect promotions as well as pay increases to be paid for out of the same budget.

If you are starting with a typical budget of 2-3 percent and need to promote people – and may want to give more to top performers and/or those behind market – there is very little left for the bulk of the employee population. Employees are much more likely to leave for higher pay if they feel their current pay level has stagnated. The companies that do this better have separate promotion and pay review budgets.

Our recent poll showed that 71 percent of companies are increasing their pay review budget this year – 20 percent of companies’ budgets are more than two percent higher than last year, 28 percent are up to two percent higher, and 23 percent up to one percent higher. This is not the year to be too circumspect with pay increases.

What else is important?

The key here is flexibility and trust. Everyone is looking at Hybrid working and companies that do not embrace this (where it is possible to do so) will simply be recruiting from a smaller talent pool, and will find it harder to attract and retain employees.

However, going further is very likely to help:

Flexibility and trust

  • Hybrid working and Work from Anywhere;
  • Providing more paid time off;
  • Consider shorter or compressed working weeks; and
  • When people need to be on site - allowing as much flexibility as possible around things like shifts, booking holiday etc;

Employee proposition

  • Leading policies on ESG, and inclusion and diversity and a total reward structure that backs this up; and
  • A modern approach to total reward with elements that employees really value in a post covid world.

In summary - get the basics right first. For example, effective people structures (this will make a huge difference), make simple targeted tactical changes (targeted pay increases, retention awards etc) and then think about longer-term strategic changes to your overall employee proposition.

Talent shortages are not going away any time soon and you need to do your best to keep yours.