We’ve been living through the greatest workplace disruption in generations and the level of volatility will not slow down in 2022. There will be new Covid variants that may make workplaces more remote. Hybrid work will lead to more inequalities around where, when and how many employees are employed. As inflation falls behind annual compensation, real wage cuts will be faced by many employees. These realities will be layered over longer-term technological transformation, ongoing DE&I journeys and ongoing political disruptions and uncertainty.
At the start of 2021, many of us expected the world to return to normalcy. Many executives believed that it would only take a few months before the world would all return to normalcy.
But 2021 was more volatile than expected, with the rise of new Covid variants, a massive war for talent, quit rates at an all-time high, and the highest inflation levels in a generation.
The level of volatility will only increase in 2022. There will be new variants that are constantly emerging and could cause workplaces to become temporarily remote again. Hybrid work will lead to more inequalities around where, when and how many employees are employed. As inflation falls behind annual compensation, real wage cuts will be faced by many employees. These realities will be layered over longer-term technological transformation, ongoing DE&I journeys and ongoing political disruptions and uncertainty.
Here are 11 underlying trends that will shape workplace volatility in 2022:
1. Fairness and equity will be the defining issues for organizations.
Debates with fairness at their core, regardless of whether it’s about race, climate change or Covid vaccine distribution have become flashpoints within society. According to our analysis of S&P 500 earnings calls, the frequency with which CEOs talk about issues of equity, fairness and inclusion on these calls has increased by 658% since 2018.
And questions of fairness, equity and justice are being asked in new ways:
- Who has access to flexible work? We have seen situations where managers give flexibility to their employees, while others don’t.
- What happens to employees who move to areas with lower living costs?
- What happens when employees move to lower-cost areas?
- In today’s labor market, companies are paying 20% compensation premiums to hire new employees. Does it make sense to pay new employees more than existing employees?
- Companies are offering new, targeted investments for specific segments of their workforce (e.g., additional financial resources to support employees with children). While these investments are critical to help those employees do their job, employees without children have asked “Why are employees who are parents getting something and I’m not?”
In 2022, executives will need to address how they are managing fairness and equity across the increasingly varied employee experience. In fact, this will be the number one priority for HR executives next year.
2. A significant number of employers won’t adopt a vaccine mandate despite strong support from the Biden administration. Instead, they will rely on testing to ensure their workplaces are safe.
In January 2021, less than 2% of companies were planning to implement a Covid vaccine mandate. That number steadily increased across the year before plateauing at the end of 2021 at less than 50%. Even with the rise of the Omicron variant, 2022 will not see a significant increase in the number of companies putting a mandate in place. Nearly half of large employers will continue to offer a testing option to ensure compliance with the Biden administration rules.
There are many factors that can cause this. Employers are worried that a mandate for vaccines will lead to mass turnover. Gartner’s survey showed that HR leaders expect nearly 7% of their workforce to leave if they establish a vaccine mandate. Although 7% might not seem like a large number and may be an exaggeration, any turnover will not be evenly distributed. Some departments in some geographies might see turnover rates of 15%.
Second: Many employers worry that a mandate for vaccines might be invalidated by a number of ongoing court challenges. They are wary of a mandate that could be reversed in the future, given that risk.
Third: Some employers do not believe they have the right make these decisions for their employees. They argue that it is still up to the employee to decide.
There is still uncertainty about what vaccination means. Do you need to get a booster shot to be considered vaccinated? The entire process can be complicated. A significant number of companies will continue to test their products, even though it is more difficult than implementing a vaccine mandate.
3. Some companies will reduce the work week . to compete in the battle for knowledge worker talent.
Employers are offering significant compensation increases to attract and retain talent in today’s market. Our research shows that the average annual salary increase in the U.S. has been over 4%, as opposed to a historical average of 2%.
But inflation has also affected real wages. Employers will see that the value of their compensation will decrease as inflation increases.
*Some companies can compete for talent by increasing their compensation, while others are not able to do so. Instead of trying to win the talent war by increasing compensation, some employers are reducing the hours employees work and maintaining a flat compensation.
In the past, workers have found leisure time more attractive and valuable as their wages rise. Employers with less liquidity will be able to offer lower hours and higher overall compensation to those who work longer hours. Ultimately, we’re likely to see a handful of organizations adopt 32-hour work weeks with the same compensation as a new way to compete for knowledge workers.
4. As hybrid and remote work becomes the norm for knowledge workers, employee turnover will only increase.
Flexibility in how, where and when people work has become a key differentiator. In the U.S., employees expect flexibility within their job as much as they expect a 401(k). Employers who don’t offer flexibility to employees will experience increased turnover as they move into roles that provide a better value proposition.
Unfortunately for many organizations, increasing flexibility will not slow turnover in today’s tight labor market; in fact, turnover will increase, for two reasons.
First, employees will be kept in their seats by weaker forces. Workers who work remotely or hybrid have fewer coworkers and therefore less social and emotional support. This weaker connection makes it easier for employees not to leave their job. It also reduces the social pressure that could encourage them to stay.
Second, as more potential employers become available, there will be greater incentives to lure employees away. The geographical reach of organizations for which someone can work is expanding with hybrid and remote work becoming the norm. This increased attrition risk remains even in a hybrid model where employees are expected to come into the office at least once a week. When employees have to commute less often, they are more inclined to accept a longer commute. The pool of employers increases along with the employee’s tolerance for commutes.
These factors will result in sustained, higher turnover rates than historical norms. The great resignation will be replaced by a sustained resignation.
5. Managerial tasks will be automated away, creating space for managers to build more human relationships with their employees.
The manager-employee relationship has become more important than ever; for hybrid and remote employees, their managers are the primary connection through which they experience their employer. Managers can also be the first to raise fairness concerns. They can help make the difference between an employee walkout and a co-created solution.
HR tech vendors are creating products to replace a growing number of repetitive managerial tasks such as scheduling, approval of expense reports and monitoring direct report completion of tasks. The next generation technology will be able to take over additional managerial tasks such as giving performance feedback and helping employees build new peer-to–peer relationships. Our research shows that up to 65% of the tasks that a manager currently does has the potential to be automated by 2025.
Companies will face a dilemma with this increase in automation: reduce the number of managers, or alter the expectations about what it takes to be a manager.
Companies that have more managers will be able to control their employees’ work better, which will result in lower labor costs. Changes in expectations for managers are necessary to shift managers’ mindsets, skills and abilities from managing tasks to managing employees. This extends beyond the management of employees’ responsibilities. It also includes managing employees’ perceptions of their career paths, the impact of work upon their personal lives and the relationship they have with the company as a whole. This shift can slow down attrition but it also requires significantly empowering managers.
6. Tools that are used remotely to measure and improve performance will be replaced by tools that can be used in-person.
Managers have less insight into the work of their employees when work is more dispersed. This can lead to biased and inaccurate performance ratings that are based on where employees work, rather than their impact. A Gartner survey in the fall of