Hiring for Hot Skills

September 5, 2017 Chris Kelley

5 Tips to Ensure Your Compensation Programs Can Handle the Heat of Hot Skill Hiring

Compensation professionals frequently face the challenge of having to solve for competitive pay rates to offer new hires with hot skills. Does this scenario sound familiar? Your Chief Information Officer calls you on a Friday afternoon wanting to make an offer to a ‘special’ candidate with skills and experience with the latest gizmo. The CIO sounds frantic because they know offering the basic package will get declined. But hiring this person is someone that the IT organization just has to have. Solving this crisis may sound easy until you have to balance the needs of the CIO today with the enterprise-wide budgetary constraints or the need to have some semblance of structure and consistency in your pay programs.

Using insights from our High Demand Information Technology (HDIT) survey and practical experience in the field, we’ve put together these tips to help you make sure your compensation programs help you meet the business needs of hiring key talent with in-demand skills.

1. Have a Hot Skills Compensation Plan

In those moments of hiring hot skill candidates, your most important attributes are speed and flexibility. The market moves fast for folks when their skills are in high demand, so you should be prepared to act swiftly. You’ll be able adapt most quickly if you have already laid out a hot skills compensation plan. Don’t over engineer this, but you should anticipate

  • Who’s covered – Hot skills don’t have to be limited to just technology roles, so you should articulate what functions are included and which ones are excluded. Also, you may want to address whether there are specific job levels where hot skills would apply and which levels are excluded.
  • What Reward Levers – More on this in a bit, but your plan should identify what pay vehicles are most appropriate based on your compensation philosophy.
  • How Triggered – Requests for some sort of hot skill pay might come in from various stakeholders, but you should define in your plan the person who is accountable for deciding when to activate your plan.
  • Pre-Approval Parameters – By planning ahead of time, you can define up-front who has what level of approval authority and the conditions that have to be satisfied.
  • Environmental Scanning – Each year in your operational planning process, you should include a systematic review of jobs and technologies that are critical to your industry and your business. This scan should also include your hiring practices and any prior hot skills pay actions taken. Taking stock of your organization’s abilities relative to the emerging trends can help you better prepare.

2. Consider Job Design Implications

Often times, hot skills compensation actions start as ‘one-off’ requests to make exceptions for an individual. At some point though, you will want to understand when this hot skill warrants a separate job code and job evaluation. Your overall approach to pay structures will influence how or when you’ll need to consider job design implications. For example, in a pure market priced approach where every job is matched to an external salary survey source, there will be less job design impact. However, organizations using job grading or even pay bands will need to address job design and evaluation sooner. Either way, some points to consider are:

  • Is this hot skill the new normal? – Expecting other individuals in the same job code to develop the same skillset may point you toward a re-evaluation of the current job vs. creating a new job code.
  • Primary duty or an ancillary ‘nice-to-have’? – Whether you consider the time the person being hired will spend using their hot skill or assess how critical that skill is to them achieving their overall results, your goal is to determine when is it appropriate to create a new job code and evaluation given your overall pay structure methodology.

For additional perspectives on this topic, check out a recent blog from our colleagues at Radford regarding specialized job titles.

3. Use Salary Surveys Focused on Skills

Your typical benchmarking salary surveys are going to be great for giving you the market data values for most steady-state jobs. Hot skills require you to take a different approach to market pricing since the focus is more on the pay practices for a specific hot skill versus how organizations are paying a commonly found benchmark job.

In 2017, our High Demand Information Technology (HDIT) survey provides more information to help you address hiring salaries for those hot skills. We are able to separate pay data for incumbents with hire dates within the past year and compare to their reported co-workers who have longer tenures. What we typically see in settings that are more traditional is that organizations take great care to manage pay compression of new hires compared to existing employees. It is even more rare to find new hires coming in at salaries above current incumbents.

  • Thirty-five percent (35%) of companies reported in their HDIT submissions that pay data is greater for their newly hired employees than it is for their more long-tenured employees with similar skills. While this is still a minority percentage, we think it represents a significant shift in practices where companies are much more willing to set aside potential concerns from an internal equity perspective and place more value on the new talent that that they are bringing into the organization.

  • When companies reported paying higher for new employees, the amount of differentiation is significant. On average, the differential is 12% higher than the existing employees are paid. The median differential is 8% higher than the amount paid to existing employees having the same skill.
  • Not all organizations report having salary range values, but when they do, we are also able to see that they appear to be comfortable hiring new employees with hot skills above the current range midpoint. Forty-five percent (45%) of the time, companies reported paying their newly hired hot-skilled employees at or above their range midpoint. The average compa-ratio was 109%.

4. Reward Levers to Use for High Demand Candidates

When you define your approach for hiring candidates with hot skills, you should be sure to address all reward levers at your disposal. For example, think beyond base salary to include short-term incentives, long-term incentives, and pay practices.

The HDIT survey has a robust collection of pay practices that organizations are using for their information technology roles. Generally, pay practices do not vary based on an individual employee’s skill, but ones you should consider when faced with having to hire hot skill workers are:

  • Short-Term Incentives – either specific goals within the existing annual incentive plan or a separate incentive plan that is additive
  • More frequent pay reviews – a hot market that continues to grow can make even your newly hired talent a flight risk within a year. Consider having more frequent pay reviews to ensure you stay competitive. This also gives an opportunity to assess just how proficient the person at using the hot skill.

  • Sign-on bonuses - one of the more prevalent pay practices we see reported in the HDIT survey is the use of sign-on bonuses to help attract new talent with high demand skills. Sixty-eight percent (68%) of companies indicate that they use these types of inducements for new hires and most commonly will use sign-on bonuses on a case-by-case (individual circumstances) or targeted for specific hard to fill positions.


5. Track and Assess Your Hot Skills Pay Plan Effectiveness

Plan up front for what information you will need to track and report on regarding your hot skills hiring. You’ll want to track things like frequency of requests, areas where needs arose, specific skills targeted, success/failure of approach, costs, etc.

You should be able to track many of those items easily within most standard HR systems, but you may find it necessary to track separately what hot skills hiring actions you take during the course of the year. Keep it simple and think first about what your reporting needs are going to be. This information will come in handy as you refine your plan for subsequent years.

A great deal of judgment goes into handling hot skills hiring requests, but with these tips and the right data at your disposal, you should be well on your way to providing the type of fast and adaptable response your hiring managers need to bring on the talent they need. Contact us for more information.

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