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Labor Shortage: What It Is, Why There Is A Shortage & How To Overcome It?

The COVID-19 pandemic affected businesses in the worst ways possible. Revenues stopped, inventory was lying unused, debts increased exponentially, and many companies had to lay off employees to stay afloat. Interestingly, as the lockdown subsided and business operations returned to normal, companies experienced an unexpected labor shortage.

Hiring workers has become increasingly difficult because of ongoing mass resignations and employees seeking more flexibility. This article will be a helpful resource if you are looking for strategies to overcome labor shortage issues.

But, before we get started with the strategies to overcome labor shortages and retain employees, let’s first understand what a labor shortage is.

What is a labor shortage?

The labor shortage is a term that indicates a gap between the labor needed in industry and the number of workers available to fill in the requirement. Simply put, there are more jobs available than the workers. It can be because workers are less willing to work in a position or a scarcity of skilled labor.

The pandemic accelerated the labor shortage issue as, during the last two years, 1 in 4 workers quit their jobs since the pandemic and have not returned to work. It is becoming a struggle to find workers to fill open positions.

Manufacturing, construction, hospitality, transportation, and healthcare are the most affected industries. If you pay attention, there is a common factor in all these industries-they require the workforce to be available in person during work hours. Also, most of these industries employ blue-collar workers and heavily rely on laborers to operate.

Why is there a labor shortage?

The labor shortage is not only because of fewer people willing to work; there can be several other factors contributing to your business’ struggle with finding or retaining the right talent.

Be mindful that none of these reasons prevents you from retaining the workers.

Poor compensation

This reason is easiest to anticipate. Workers want to be paid more, at least what they are worth. Industries like construction, mining, healthcare, and manufacturing especially face labor shortages as the pay is less than in other sectors.

The limited wage is not enough to meet the increased cost of living and healthcare, pushing workers to look for positions that pay them better.

Lack of flexibility

Since the pandemic, employees have been more discerning of opportunities that allow them to have a better work-life balance. Workers now seek increased flexibility, but employers remain reluctant to offer the same. According to a survey by Future Forums of 10,000 knowledge workers, employees want more flexibility in jobs and, if possible, location. As remote working is not an option for most of the mentioned industries, an evident lack of flexibility causes workers to look for work in other segments.

A question of purpose

For many employers, it may seem inconsequential, but workers are increasingly losing their sense of purpose at work. Employees who are not connected to their workplace cannot be passionate about their jobs. It eventually forces them to leave work. If your company is facing a labor shortage, reevaluate the work environment, and if missing, try to create opportunities that will make employees feel more excited about their roles. Indeed surveyed workers who voluntarily left their jobs in 2020 and found that 92% of the respondents felt “life is too short to stay in a job they weren’t passionate about.”

If workers do not feel connected with the company’s goal and vision, they may not be inspired to stay at the job.

8 Ways to deal with the labor shortage

1. Train and cross-train existing employees

The mass exodus of the workers can leave companies in limbo if those leaving are skilled workers. You must implement training programs to help workers across domains acquire common skills to keep business operations up if there is a labor shortage. Cross-training employees can help. For instance, production staff can be trained to handle maintenance responsibilities if the situation arises. Cross-training does more than retain employees; it creates a sense of value and community.

2. Improve the work environment to reduce employees leaving the organization

As we mentioned above, the work environment is one of the main reasons why employees work or leave a job. You are walking in circles if you are wondering how to solve workforce shortage without addressing the issues causing employees to leave. Ensure that the work environment is positively inductive for employees. For example, if you are in the manufacturing industry, your employees must feel safe at work with all safety measures.

3. Recognize and reward employees

Acknowledging workers’ hard work and sincerity and rewarding them appropriately will boost their morale and keep them engaged. Make sure your employees are not feeling neglected, and their efforts are recognized and rewarded. Just offering perks alone is no more an incentive good enough to keep workers; you have to make them feel appreciated and valued as part of the team.

4. Make opportunities for them to develop and grow

Pandemic has changed the workforce a lot. Everything needs improvement – skills required for the job, where and how work is performed, and what motivates the workforce. To overcome labor shortages and retain employees, you must create opportunities for them to learn and grow. Take a fresh look at the workforce and try to identify opportunities where you can introduce improvements. For instance, if your manufacturing unit relies on manual labor for production, you can introduce CNC machines for repetitive tasks and train the workers. This will present them with an opportunity to develop and grow.

5. Automate tasks

If your company has scope for automation, explore solutions for the same. The more automated tasks are, the lesser workforce will be required. In the wake of the rising cost of labor and the shortage of workers, several companies have considered automation to reduce the up-front cost of hiring or maintaining a large workforce. Partnering with consulting firms to explore automation integration in the business processes will provide an answer to how to solve the workforce shortage.

For example, you can use automation to help remove infrastructure bottlenecks and free up human resources to work on operations that contribute to the revenue directly.

6. Pay bounties to employees who bring new employees

Why not turn your workers into headhunters by offering them incentives for referring talent to the company? Instead of outsourcing the hiring process or relying on the HR team to solve workforce shortages, you can introduce a referral bonus for employees to bring in new talent. At some of the most successful companies, 28 to 30 percent of the new hires come from employee referrals. If they can do it, so can you.

7. Be flexible with schedules

Flexibility is a requirement, not an option, to retain workers. Now employees seek a more positive work-life balance and opportunities that offer the flexibility to work. By creating flexible work schedules, you can let workers feel relaxed about their routine and not stressed. It will help prevent employees from leaving.

8. Use time tracking tools

Employees adequately compensated for their work time build trust in the managers and the company. Using time and attendance management tools to record attendance would be best. Such tools also free HR managers from manually managing attendance and shifts, a process often susceptible to human errors.

Truein is a face recognition attendance system that can help companies schedule shifts, track timing, and efficiently distribute workloads among employees. It can automate report generation, directly integrate attendance records with payroll software, and for remote sites and field workers.

Conclusion

There is no telling when markets will emerge victorious from the acute labor shortage facing businesses today. While the HR gurus can only make predictions based on surveys and studies, business owners need to make tough decisions. The strategies we have listed here are helping companies across the globe overcome the labor shortage. We hope you, too, can recognize what’s causing the labor shortage at your company and implement the appropriate measures to fill in the gaps.

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