Financial Services Ireland

How does a tight labour market influence companies’ retention strategy?

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Produced by Dr. Loretta O’Sullivan, EY Ireland’s Chief Economist, and the EY Economic Advisory team, our recent Economic Eye provides an all-island economic forecast and commentary for the Republic of Ireland and Northern Ireland. It offers insight into the current economic environment as well as an indication of what’s to come for businesses in a complex marketplace over the next 12-24 months.

Labour market conditions are projected to stay tight in the period ahead, with further employment growth and only a small uptick in the unemployment rate forecast. In this context measures to boost the labour force will be key, such as increasing the participation rate. Upskilling and retraining, as well as employers offering flexibility, will be important in ensuring Ireland can continue to attract workers to meet any skills gaps.”
Loretta O’Sullivan, Chief Economist, EY Ireland

What does a tight labour market mean for Employers, Employees and the Economy (the ‘3Es’)?

1. The Employer Perspective

Speaking with our own clients, we know that attracting and retaining talent is one of the key priorities for the year ahead. CSO data shows that the number of job openings in ROI at the end of March 2023 was high at over 30,000 and unemployment is at 4.1% as of August 2023. For employers, these market conditions mean reduced choice and greater difficulty in filling vacancies.

On the contrary, in a low employment environment, employees find themselves with more choice. As an employer, it is critical to cultivate a workplace culture that values and nurtures talent. This involves providing continuous learning opportunities, mentorship programs, and well-defined career development paths. Recognising and celebrating diverse talents within the organisation fosters creativity and innovation. Inclusivity not only enhances retention but also brings fresh perspectives to the table, creating a dynamic and agile workforce.

When employees have a clear growth trajectory within the organisation, they are more likely to invest in their roles, and be loyal. Personal support, including well-being initiatives and mental health support, coupled with professional support such as work-life balance, regular feedback, and recognition, strengthens their commitment to the company.

Furthermore, fostering a sense of purpose establishes a robust bond between employees and the company. This alignment with company values begins from the talent selection process, emphasising the importance of shared values in hiring decisions. This approach fosters a sense of belonging and commitment, enhancing retention efforts.

In essence, talent retention goes beyond pure talent attraction; it encompasses nurturing, growth, purpose, and alignment of values. Research findings from Gallup underscore the significance of supportive work environments. Employees who feel their well-being is prioritised are 21% more productive, leading to increased engagement and loyalty. Additionally, a supportive work environment, inclusive of mental health support and work-life balance initiatives, substantially reduces turnover intentions among employees, ensuring a stable and motivated workforce dedicated to the company’s success.

2. The Employee Perspective

For candidates, and employees, the labour market offers greater choice and with this of course is greater bargaining power. We may immediately think this relates to pay but in fact other factors are important here. Recent EY Workplace research, part of the ‘Belonging Barometer’ series, found that 63% of respondents across generations currently prioritise Diversity, Equity and Inclusiveness (DE&I) in choosing a company over one that does not, and it’s of even greater importance to Gen Z and millennial talent. The reasons for choosing one employer over another go deeper than the annual salary. It’s about an enhanced employee experience. In a post-pandemic working world, with a renewed focus on work-life balance, candidates want to know about the organisation’s culture and purpose and if they offer flexibility.

Today’s candidates are looking for a more tangible commitment to their career development – how the role can demonstrate a clear pathway to leadership and influence.

3. What does this mean for the Economy?

Overall, the talent in Ireland continues to see worthwhile opportunities for work and career advancement but other factors may impact this into the future, most notably the housing situation which could act as a deterrent for those who may have otherwise considered Ireland an attractive place to work.

What can Financial Services (FS) organisations do?

The nature and profile of the most important skills needed by FS organisations are changing. In this context, the competition for talent has also changed – it’s no longer only sector peers or industry competitors who are looking for the same skillsets. For example, a candidate with strong commercial skills and an aptitude for technology could join the Tech/IT team of a large bank, insurance company or indeed work in a commercial capacity for one of the tech companies.

Developing a robust talent strategy for FS firms

When pulling together the long-term talent strategy for the organisation, the following should be considered:

  • Conduct a mapping exercise, detailing current and future skills that the organisation will require.  Building that talent pool now will benefit the company into the future.  We recently worked with a client on their broader organisation design, in which they discovered that the business was investing heavily in senior, specialist skills in particular disciplines for example technology, risk management and process design.  However, these specialists were not being properly integrated into teams and functions, diluting their effectiveness, and leading to duplication of skills and responsibilities.
  • This clearly demonstrates that it’s vital to look at the talent and recruitment process end-to-end and consider the environment that expensively acquired hires will be asked to operate in upon joining. Re-design may be required to enable people to operate effectively and have an impact in their roles.
  • Understand your employer brand and make it visible where it will have most impact.  Take time to understand your target audience’s perceptions and expectations of your organisation then use these insights to shape your talent attraction strategy. You cannot assume they will “know” you or that they will see things you have to offer.
  • Consider the experience for existing employees as well as external candidates – many people report that finding and pursuing opportunities in their own organisation is more difficult than looking externally. Internal mobility can unlock unexpected talent pools and aid retention.  Think about the design of your organisation and the experience it offers people. If you are seeking highly qualified, self-motivated and ambitious people, are you placing them in a team structure and a culture that will enable them to thrive?
  • Be deliberate about attracting more diverse talent and show that commitment. Rebalancing the traditional gender split in the FS sector can only really happen if organisations deliberately hire and promote more women than men thus changing the historic dynamic.
  • Flexibility is part of the new world of work, but organisations need to be clear about what is means for them. Is it “just” hybrid working? If so, is a strict rules-based approach to hybrid the best way to create flex? Other avenues to creating this empowerment exist, but the hybrid genie is out of the bottle and becomes contentious if it is implemented in a directive, top-down manner.  In our experience, organisations who take time to reassess the cultural shift since the pandemic are in a better position to identify whether they have an over-reliance on specific types of in-person events to drive connections or relationships. This applies to both employees and clients. In doing so, leaders can move past “wanting to recreate what we had” and instead focus on a broader range of initiatives more suited to how people want to communicate, learn or network with their peers.

There is no one-size-fits-all approach to shaping your workforce and organisation of tomorrow. EY can support you through your organisational transformation to achieve your desired operating model. If you have a question about any of the topics mentioned, don’t hesitate to get in touch.


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