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Manufacturing report: Hiring to increase, compensation issues a big concern

Hiring rates will reach four-year highs in the manufacturing and service sectors, according to the Leading Indicators of National Employment® (LINE) Report, which was released recently by the Society for Human Resource Management (SHRM).

The SHRM LINE Report, based on a survey of human resource professionals, predicts employment activity for the coming month, about 30 days before statistics on employment for the same time frame are available from the U.S. Bureau of Labor Statistics. According to the report, a net of more than one-half of manufacturers (53.2 percent) and almost one-half of service-sector companies (49.2 percent) will add jobs in July, which is a 14.8 point increase in manufacturing and a 6.7 point increase in the service sector, compared to the same time last year. In June, hourly and salaried job openings also increased compared to a year ago, with the greatest increase in the number of service-sector hourly vacancies.

Challenges in recruiting for key positions also hit a four-year high in both sectors, according to surveyed human resource professionals. In June, a net of 25.9 percent of manufacturing respondents and 19.3 percent of service-sector respondents experienced more difficulty in recruiting.

“With hiring rates trending upward, it makes sense that recruiting difficulty has also continued to rise,” said Jennifer Schramm, manager of workforce trends at SHRM. “The index rose in both sectors in June compared with a year ago, indicating that competition for the most qualified candidates in key positions may be heating up.”

Marni Hockenberg, Principal of Hockenberg Search, a Twin-Cities based retained search firm that specializes in manufacturing recruitment, can attest to the competitive nature of hiring talent because her firm lives this every day with their clients.She provides some insight related to manufacturing recruitment challenges when compensation is an issue.

"Manufacturing companies are struggling to fill positions in a timely manner for a variety of reasons," says Hockenberg. "And one of the primary issues is the delta between employer’s long list of hiring requirements and the compensation being offered for the position."

"This inverse relationship between expectations and price is frustrating for all parties involved in the hiring process," Hockenberg added. "As recruiters we’ve observed that as the candidate market tightens, employers add more ‘must-have’s to the job description but don’t increase the compensation to be commensurate with their expectations. This phenomenon could be described as having 'champagne tastes on a beer budget.'"

The report also found that more employers are increasing compensation for new hires. A net total of 10.9 percent of manufacturers and 12.5 percent of service-sector companies reported increasing new-hire compensation in June.

“Compensation is now the top employee job satisfaction factor,” said Schramm. “In response to this more competitive environment, employers may begin experiencing pressure to increase wages.”

However, some manufacturing companies have internal pay equity issues and can’t bring in a new hire at a pay range higher than their current staff, Hockenberg adds.

"This is understandable especially in larger companies with pay grades," says Hockenberg, who provided these tips for employers to consider if increasing the pay range for a new hire is out of the question:

1. Evaluate your current compensation plan. You may need to adjust compensation to align with current market conditions. If your current staff is underpaid, you cannot reasonably expect a potential new hire to take a substantial cut in compensation to work for your company.

2. Take a reality check and adjust your expectations of skills, experience and personality to align with the compensation offered for that position. Are you being realistic? Flexibility is the key. Can you provide training to make up for a gap in experience? Do you really need a particular certification, software program, or number of years of experience? If a position is left unfilled for an unreasonably long period of time and you can’t (or won’t) increase the compensation, then wouldn’t it make sense to relax some of the hiring criteria to find a good hire and move on with your business?

3. Offer a sign-on bonus to a new hire if you cannot agree on a base salary. The bonus could be paid in increments commensurate with the amount of time the new hire stays with your company. This doesn’t tip your internal equity and can help you land the right candidate for your job.

4. Many candidates value time over money. Can you increase the number of days of vacation or PTO to a prime candidate? More time spent with family means more than extra cash in a paycheck to some people. Ask them.

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