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Recruitment and Retention Strategies for SMEs

How do you best recruit and then retain valuable employees? That is a vital question for all businesses as well as the private and public sector. One of the common themes of the current wave of strikes in the UK is not just rates of pay, but the impact on employees of inadequate recruitment, poor morale, burnout stress, and low retention of staff.

It seems obvious that rates of pay will do a lot to attract new candidates, especially given the pressures we all face in terms of higher energy bills and double-digit inflation, but while firms certainly must be competitive in terms of remuneration, the importance of associated benefits packages is also vital. Recent workforce surveys seem to suggest that important though salary levels are, cash isn’t the be all and end all for many good candidates. The cost-of-living crisis notwithstanding, remote working during the pandemic seems to have changed how people view compensation. Successful talent acquisition and retention now depends on several factors.

Businesses will need a more tailored, holistic, recruitment approach with more consideration given to home situation, family responsibilities, and personal wellbeing – recruiting a person, rather than fitting a job description. It’s clear that companies will have to listen more to candidates, understand the skills they need, use technology when it helps, and nurture the good people they already have. All this will make businesses attractive to the potential employees needed by the business for it to grow and develop.

Building Your Employer Brand

Branding is not just for your customer base but is also the way existing and prospective employees perceive you as an employer. Building your employer brand is crucial in telling prospective candidates what you have to offer them. Start thinking about what makes you different as an employer. What employee benefits do you offer? Do you host social events for employees? Do you offer career development opportunities and training? It is these kinds of things that attract candidates to your organisation, so make sure you mention them in job adverts. If you have a careers page on your website add a section on what it’s like to work with the firm, using quotes from existing staff or even a short video. Showcase your staff and culture on social media.

Reviewing the Recruitment Process

Even if you have an established employer brand, how does an SME decide between building their own internal recruitment department or using an external agency? There are pros and cons to each approach, but which route you choose depends upon which works best for your particular circumstances.

Managing Recruitment Internally

Managing recruitment and selection within your company does mean you have quality control over all the processes with a focus on your company, all of the time. After all, you will know your company better than any external party ever can. But unless you do the job yourself, establishing an internal team will cost money. If your processes are inefficient you may end up spending a lot of time – which costs even more money – but these costs can often be lower compared to agency fees. In addition, there will be no ongoing fees based on a percentage of salary.

An in-house team will also have full candidate access so you will see every candidate who applies, reducing the possibility of good candidates being dismissed too soon in the process. In-house recruiters are also employees, so they will understand the culture of your company, meaning they are more likely to hire individuals who will be a good fit with the existing team. They will have nothing to gain (financially or otherwise) by proposing specific candidates and are likelier to hire the best person for the job on merit.

Agency Recruitment

Agency recruiters are specialists whose expertise is greatly increased when you use an agency familiar with your industry or sector. Agencies come in many shapes and sizes, with a recent rise in new hybrid players offering ‘fixed fee recruitment’, ‘online recruitment’, and ‘outsourced recruitment’ options. Most will work for a set fee-per-hire, or for a retainer fee agreed at the start. Agencies can find you someone very quickly, so if the recruitment need is urgent, they can often get a suitable candidate from their existing network of contacts.

Agencies are usually better equipped to fill niche roles. Part of the agency process is to screen or ‘qualify’ potential candidates, which is very time consuming. This saves you time and effort, meaning you can focus on the ‘day job’ without the extra commitment of having to run a recruitment campaign.

The recruitment agency will of course be highly motivated to fill your role because success for them means financial gain, but this doesn’t necessarily guarantee a quality placement.

One of the most important lessons however is that all contracts are negotiable. Do not feel that you must agree to an agency’s Ts & Cs. Their Ts & Cs tend to be extremely one sided (benefitting them), but Motion Paradox’s lawyers have a great deal of experience of renegotiating contracts, including with employment agencies. Feel free to contact us to see how we can help you.

Automated systems can also reduce the cost and time constraints of traditional recruitment, but there are risks in hiring ‘straight off the web page’ without an in-person interview.

Look at Skill Sets Instead of Job Titles

Whatever approach to recruitment is adopted, good advice is to hire the best talent you can, even if that does not necessarily fit a specific positional need. Recruiters describe a candidate with precisely the right range of qualifications that perfectly fits a job as a ‘purple squirrel’ (i.e. not that easy to find!). Over-specification of the requirements for your ‘perfect candidate’ can also be limiting and damaging. Excellent candidates may not be an exact fit, but are likely to be flexible, self-motivated, and determined. They will have an aptitude and desire to learn new things and are likely to be real team players. Assessing all these attributes is much easier face-to-face, which is time consuming, but looking a candidate in the eye is still the best way to assess how good a fit they will be. Thought will also have to be given to onboarding processes which make sure new hires are embedded effectively, so they can become productive more quickly.

Retaining Good Employees

Once you have found your ideal employee, how do you make them want to stick around? Obviously, for employees to make a long-term commitment to your firm, the employer will need to give them good reasons above and beyond simple remuneration. Showing your employees trust by giving them responsibilities that allow them to grow and gain new skills will help. Hiring from within wherever possible and giving generous promotions at appropriate times also builds morale and commitment.

Linking part of the wage to company performance through profit share or similar mechanisms will align your people’s interests with the company’s goals and provide an incentive to stay with the firm as it grows. Making the fixed cost of payroll inherently more variable also means you can make your company more resilient and agile. Any rewards you give your employees should speak to their emotional or domestic needs and should go beyond monetary compensation. Be generous with time off, because while you have every right to demand commitment and high-quality work, it is unreasonable to expect that continual level of performance 100 percent of the time.

The Exit Interview

If, despite all these steps, your staff retention rate is low and turnover high you can learn a lot from conducting thorough exit interviews. What attracted the employee to your organisation, and why are they leaving? Sometimes owner/founders of SMEs or managers don’t always see the workplace dynamics, especially if they’re in meetings or unavailable a lot of the time. Exit interviews can give an insight into the working culture and whether there is anything you can do to improve it. The exit interview will also give valuable information about external factors that may be pushing employees out the door, such as competitors offering better pay or better compensation overall. Perhaps not what you’d want to hear, but constructive criticism is one way to learn, grow, and retain staff.

Talk to the experts here at Motion Paradox about recruitment and retention. We’ve been where you are. We can give you advice based on our own experience of precisely the same issues you now face!

The Impact of Brexit on SMEs Becomes Clearer

Even with factors such as the pandemic lockdowns, the September “mini-budget” and the measures announced in the Autumn Statement on 17 November, the impact of Brexit, especially on SMEs, is becoming clearer.

Most recently, Michael Saunders, an external member of the Bank of England’s Monetary Policy Committee, who left that position this month, felt free to comment on Bloomberg TV:

“The UK economy as a whole has been permanently damaged by Brexit”.

Former UK government Environment Secretary, George Eustice, now a back bench MP, similarly felt free to suggest that the much-vaunted Australia trade deal is not actually a very good one for the UK, increasing UK GDP by a mere 0.02% annually, and even then, only after 15 years.

The Big Brexit (a report published in June 2022 jointly by The Resolution Foundation and the London School of Economics) gave an ongoing assessment of the impact of the UK’s Trade and Cooperation Agreement (TCA) with the European Union (EU) and what the lasting impact of Brexit is likely to be.

The report suggests that Brexit has not had the expected effect of diminishing exports to the EU, but instead has more broadly reduced the openness and competitiveness of Britain’s economy – a decline not explained by changes in the pattern of global trade or the pandemic. The report cites a fall of eight percentage points in UK trade openness (total trade as a share of GDP) and also notes that the UK lost market share across three of its largest non-EU goods import markets in 2021: namely the US, Canada and Japan.

The authors of the report suggest that, while the overall structure of the economy will not change, some sectors will suffer – one of the worst hit being the manufacture of electrical equipment, which is particularly reliant on cross-border supply chains. They conclude that, while many believed the impact of Brexit would be a “one-off shock”, the reality is that, even without the current dire condition of an economy facing a lengthy recession, the fallout from the decision to leave the EU will be gradual and pervasive, affecting Britain’s competitiveness and productivity for at least the coming decade.

Immediate Brexit Challenges for SMEs

Some larger businesses are able to claim financial support when it comes to exporting from the UK. UK Export Finance, the UK government’s export credit agency, is currently lending its highest amount of credit in 30 years.

The government set up an SME fund offering various grants, however, applications for this scheme ended on 12 July 2021. There are lots of complex rules that businesses now need to come to terms with, many involving hidden costs, so getting the right advice and planning ahead is vital. There are some immediate Brexit-related issues that SMEs could and should address immediately.

Right to Work Checks

The adjustment and streamlining of Right to Work checks introduced in March 2020 in response to the coronavirus pandemic ended on 30 September 2022. So, as from 1 October 2022 employers either have to conduct their Right to Work checks in person or implement suitable, compliant processes through an IDSP (Identity Service Provider). The type of check you must now conduct will depend on a number of factors, such as the nationality of the worker, but you cannot dictate how an individual proves their eligibility to work in the UK.

Any Right to Work processes you have in place must be compliant and implemented consistently and correctly, otherwise Home Office enforcement action can be taken against your organisation. You can find more information at https://www.gov.uk/check-job-applicant-right-to-work and https://www.gov.uk/guidance/employing-eu-citizens-in-the-uk

Employing EU Nationals

Since 1 January 2021, companies have been required to have a sponsor licence to hire EU nationals. This is an issue for many businesses, especially the hospitality sector, which suffered during the pandemic despite extensive government support. Trade group UK Hospitality squarely blames Brexit for these problems. Potential recruits must now meet a specific set of requirements for which they gain points. Visas are then awarded to those with enough points. Businesses who need to hire EU nationals (or employees from outside the UK in general) should understand the responsibilities and steps they should follow and consider reviewing recruitment processes to ensure compliance with the new rules. You can find more information at https://www.gov.uk/guidance/recruiting-people-from-outside-the-uk.

Intellectual Property/Trade Marks

Before Brexit, you could apply for an EU trade mark which would also cover and protect you in the UK and this meant that you did not necessarily need to have both an EU trade mark and a separate UK trade mark. The Intellectual Property Office (IPO) has created a comparable UK trade mark for all rights holders with an existing EU trade mark. You can check that the IPO has created the comparable trade mark at: https://www.gov.uk/search-for-trademark. More information about trade marks can be found on the government website.

Domain Names

Those whose businesses are exclusively on-line should note that, since 1 January 2021, you are not able to register or renew .eu domain names if your organisation, business is established in the UK but not in the EU/European Economic Area (EEA) or you live outside of the EU/EEA and are not an EU/EEA citizen. If you already have a .eu domain or are considering obtaining one, you should check the eligibility criteria set out in Article 4(2)(b) of Regulation (EC) No 733/2002, as amended by Regulation (EU) 2019/517, and seek legal advice if necessary. You can find more information about domain names at https://www.gov.uk/guidance/registering-and-renewing-eu-domain-names-in-the-uk.

UK Employees Working Abroad

Since 1 January 2021, any UK employee who goes to work in an EU country will need a work permit and, in most cases, a job offer from the chosen country to get a visa to move there. Criteria for obtaining a visa may differ between EU member states, so it is important that you talk with a UK-based embassy of the country you want to work in to see what the procedure may be. You can find more information on this at https://www.gov.uk/working-abroad.

Brexit Guidance

More information about how new Brexit rules apply to things like travel and doing business with Europe can be found at https://www.gov.uk/transition, but should you have any questions or queries please do not hesitate to reach out to us. The Motion Paradox team are here to help.