In fact, the Bureau of Labor Statistics shared noted the number of job openings inched back up again to 11 million open roles available in the United States, with employers struggling to fill positions.

Candidates continue to put higher salaries at the top of their requirements list for new prospective positions, and continued turnover has put employers in a tough position. Recent Employ data reported that 37% of job seekers were looking to switch employers to seek higher wages.

So, what exactly is the phenomenon that’s happening to loyal employees? And, just as importantly, how is it impacting your employer brand and reputation?

What is an employee loyalty tax?

Loyalty tax occurs when current employees are penalized for staying in their existing roles by receiving less than new hires for the same position, or not receiving market adjustments to their salaries.

According to a recent LinkedIn article, new hires are often paid seven percent higher for the same role, while another study puts loyalty tax on employees even higher at 10-15%.

These are typically employees who should qualify for annual raises, but were potentially denied one for larger organizational reasons, including to avoid layoffs, to make up for poor performance, or the company has decided to stay a laggard compared to the rest of the market in its approach to pay.

Not giving out market-centric annual raises can significantly hurt both employers and employees who stick with a company for multiple years, while getting minimal (if any) raises or bonuses.

Miscommunication and poor salary budgeting can force employees to pay this tax for staying at the org. But, candidates are quickly figuring this out and finding companies who also know this.

If turnover is high and quality employees aren’t properly compensated, it could mean that executive leadership is not on the same page as HR and TA leaders.

This can create a challenge for recruiting quality candidates, and cause a vacuum of talent leaving the organization in search of higher pay, greater benefits, and greater recognition for their contributions.

How companies can avoid a loyalty tax

A loyalty tax can harm an employer’s brand during such a critical time in a highly competitive job market. But, a loyalty tax on your employees is not a given.

Getting company leadership, HR executives, and talent acquisition teams on the same page when it comes to priorities and budgets for the year can help ensure current and new employee contributions are valued and rewarded appropriately.

Strategic HR teams analyze key metrics like employee retention and engagement and salary rates to track overall company satisfaction and find areas of improvement.

Prioritize employee support and enablement

One of the biggest ways to avoid charging employees a loyalty tax is to have executive and TA leadership consistently communicate about the state of hiring in the company.

Remember: Job seekers want to find a company that values employees, prioritizes DEI, enables workplace flexibility, and leverages automation to improve communication, feedback, and time to hire.

Implement an internal mobility program

Candidates today want to work in a place that invests in their professional and personal growth. In fact, a recent Lighthouse Research & Advisory Report shared that 83% of candidates ask about future career opportunities during the hiring process.

Many recruiting teams have pivoted their strategies this year to focus more on internal mobility and employee networking to fill positions.

The benefit of prioritizing internal mobility is giving employees the chance to expand and grow in their careers within your company, and not at a competitor.

Actionable strategies to reduce the loyalty tax

Employers that want to build a more robust employer brand, provide a strong employee value proposition, and pay competitive salaries to employees leverage strategies to ensure retention is rewarded rather than penalized.

While a loyalty tax can’t be eliminated overnight, there are ways to help reduce it and improve engagement. HR and talent teams invest in the technology to keep a pulse on employees, and to find, hire, and retain top talent for their business.

Here are some steps you can take to reduce the loyalty tax on your employees and retain top talent:

• Ensure TA leadership, HR executives, and company executives meet regularly to analyze and ensure budgets are prioritized for talent raises, merits, and incentives for current employees.
• Create and develop an employee referral program that incentivizes employees to refer their networks to open positions. Include incentives for managers to refer employees for promotions or internal developmental career moves.
• Regularly analyze the labor market and economic reports to determine fair wages for existing employees doing the jobs that they already do. Find companies that publish their salary ranges for similar roles to get an idea of the benefits offered by competitors.
• Send out quarterly company surveys to get feedback from current employees and find areas of improvement before they turn into pain points.

Start building value for employees and candidates

With top talent in short supply, it’s crucial for companies to prioritize their employer brand and employee value proposition. High turnover in the market shows that candidates know what they want and are willing to switch companies to find it.

Be sure your talent acquisition team is equipped to combat high turnover and recruit qualified employees with Employ’s Recruiting Effectiveness Planning Kit.

• Socially: Women who make an effort to fix longstanding issues (e.g., gender pay gap)
• Economically: Female leaders at businesses of all kinds (not just Fortune 500 brands)
• Culturally: For instance, women of color who break through barriers in film, music, and TV
• Politically: Local, regional, and state leaders who positively impact their communities

And yet, it’s important attention is (rightfully) paid to women throughout the year — not just a single day of the year. To do so requires a commitment of people and organizations working together to promote the advancement of women every day.

As a woman, a mother, wife, and member of the labor force, I am thrilled to be part of this celebration, and would like to take the opportunity to acknowledge the challenges we face collectively, and the steps we can take to support women and advance their outlook across orgs today.

Let’s first look at the state of women in the workplace — particularly those in the U.S. labor market.

Recent setbacks for women in the workplace

Since the onset of the global COVID-19 pandemic, the participation of women in the workforce has dropped drastically. The U.S. Department of Labor reports that the labor force participation rate of women is at just 56.8% as of January 2022 — markedly lower than before the pandemic began.

And the rate of women in the workplace has not rebounded since. That means women’s advances over the last 30 years have been fully erased, without promises for potential gains in the future.

This data is alarming. No business leaders wants to see so many women leave their companies. But, it does represent an opportunity for employers and for employees alike.

3 ways to support women in the workplace

In the spirit of IWD, execs must move toward greater support and inclusion of women in the workplace (and global workforce at large). With that in mind, let’s examine how C-suites can better recognize and support women of all races, gender identities, orientations, abilities, and backgrounds.

1) Acknowledge the burden of care falls to women

A friend of mine once said women today are expected to work like they have no caregiving responsibilities, and to serve as caregivers like they have no work.

This paradox represents the reality many women are facing today. As a woman in the workforce, I have experienced first-hand the challenges associated with being a caregiver to children, once being forced to reduce my own work from full-time to part-time to keep up with the demands of both roles.

Further, 59% of women were forced to leave their jobs when caring for children versus 39% of men, 45% reduced their work hours, and 11% left the workforce for six or more months.

The same is true in caregiving for adults. Women are the predominate caregivers for the elderly, according to the National Center for Biotechnology Information, accounting globally for between 57% to upwards of 80% of all caregiving for the elderly.

And, according to the same Fidelity Investments Study, this had great impact to women as workers.

Understanding that the burden of caring for others is real to women and has a tangible impact on them is the first step toward greater recognition of their contributions not only within companies today, but in overall society.

2) Establish programs that support all women

Addressing the burden that falls to women starts by creating a culture of inclusivity, flexibility, and accommodation.

First, in relation to the caregiver burden, organizations can actively establish — and promote — flexible work hours, supportive leave policies, remote and hybrid work options, mental health services, counseling, and other employee assistance programs that directly affirm women in their roles.

Interestingly enough, the Fidelity research shows that “64% of working caregivers said they had not asked their employer whether specific benefits or flexible work options were available,” but of those 36% who did ask, “61% reported their employer was willing to work to accommodate their needs.”

Second, ensure that your company takes an active role in developing and focusing on diversity, equity, and inclusion (DEI). Create a welcoming environment for all people that is inclusive of all walks of life.

That means ensuring your business is accepting of and builds a culture around workers of different ages, races, sex, gender identities, religious affiliations, orientations, parental status, disability status, military status, and neurodivergence.

Top talent teams are familiar with creating a more diverse, equitable, and inclusive workplace.

• Focus on hiring women in underrepresented sectors, like technology.

Deloitte reports that large technology companies are making “slow, but steady progress” with an increasing proportion of females in technical roles. In fact, over the past three years, the average number of women in these types of roles has risen nearly three percent to 25% overall.

Creating an environment where women feel welcome, supported, and recognized for their contributions both within the organization — and outside of work — will pay dividends for employee engagement, loyalty, productivity, and innovation.

3) Stop the bias of employment history gaps 

One inherent bias that exists for employers today is generalizing employment history gaps for those individuals seeking work. Long gaps in work service are seen as negative to orgs and may blind them to potential talent who were fulfilling home or familial obligations in a system that does not support caregivers.

The Fidelity Investments Study found that 53% of workers who were required to step away from their careers reported their time away was longer than anticipated, and 37% indicated they earned less money once they were able to return to work.

This is the point at which the gap in work history becomes much harder to overcome.

In fact, as two years turn into three, one study suggests the chances of getting an interview fall by more than 50%.” For women wanting to re-enter the workforce, particularly after a long pause due to the pandemic, organizations must proactively support hiring women despite longer career breaks.

They must awaken to the realization that caregiving should not stunt women’s careers.

Instead, they should advocate for systems and structures that support the demands placed on women and demonstrate their commitment to the value women add in the workforce.

Using IWD as a “launchpad” for better supporting women in the workplace today

The IWD celebration is the moment orgs need to rally together, showcase the achievements of women, and support them in their efforts to create a more accepting, welcoming, progressive workplace.

Let’s dig in and do the work together where the workforce becomes a representation of our society and values the holistic contributions of women in their jobs and in their lives.

Employee performance is directly related to business performance and success. But, most managers and employers don’t give performance management the importance it deserves.

If you want to improve your small business’s bottom line and productivity, it’s time to give this aspect of organizational development some serious thought.

6 performance management tips for business leaders

Business owners and leaders face certain problems when it comes to performance management. Let’s look at these challenges and how you can overcome them:

1) Setting goals and milestones

Without clear goals, workers won’t know what they’re supposed to be working to achieve.

Solution: Understand what you want for your business. Break that down into specific goals that your team can reach in a certain timeframe. Then, communicate these to your employees. This reminds them of what they’re trying to accomplish and how to make it happen.

2)  Strategic planning and focus

Goal setting isn’t going to work without a plan in place to help employees focus on goals.

Solution: To be truly effective, your performance management process should be aligned with company objectives. Help your team to understand how their efforts contribute to critical goals. Then, make a plan that focuses on prioritizing tasks that impact organizational progress the most.

3) Proper evaluation and feedback

Without balanced and timely feedback, performance management cannot be done effectively.

Solution: Annual reviews only address recent issues and accomplishments. Instead, you should evaluate employee performance and provide feedback regularly. This boosts motivation, ownership of problems, and productivity.

4) Regular coaching and training

Similarly, employee assessment isn’t ineffective if it’s not paired with ongoing training.

Solution: Implement learning and development strategies that help employees grow both individually and as a team. With the right mentorship, coaching, and skill development programs, you can improve employee performance, engagement, and productivity at the workplace.

5) Leadership and management support

Moreover, if you aren’t helping workers solve their problems, they have no reason to help you solve yours.

Solution: You can boost performance management processes tremendously by encouraging leaders and managers to provide guidance, help, and support to employees. This boosts morale and loyalty at the workplace, increases employee retention, and encourages your whole team to work harder.

6) Reward and recognition programs

Motivation and confidence cannot improve without an appreciation for positive actions and behaviors.

Solution: Lack of appreciation and recognition can demoralize your team, leading to poor employee performance. Make sure you have well-planned processes in place for rewarding and promoting accomplishments, actions, and behaviors that have an impact on your business’s success.

Because of the significant connection between worker performance and organizational development, you cannot neglect performance management. This isn’t just a formality put in place by HR, but an essential part of your company’s daily functioning and eventual success.