Spotlight on Turkey – The Effect of Inflation on Recruitment and Retention
Turkey’s inflation rate has been rapidly increasing since May 2021, when the central bank decided to cut key rates amid the decline of the Turkish Lira. Higher consumer prices and a devalued currency forced the Turkish government to increase the minimum wage of its working citizens twice in 2022.
The inflation uncertainty has significantly affected hiring processes and decision-making in the country, and many organisations have been forced to apply multiple salary increases throughout the year to protect the purchasing power of their employees.
Sezin Yesildag, Head of Human Resources EMEA/RBIS at Avery Dennison, describes the challenges HR leaders in Turkey face in 2023: “The most problematic aspect of managing the inflation rate is to establish an accurate cost of living that in turn defines the compensation plans. However, finding qualified candidates in a talent-short market with inconsistent compensation expectations is a real challenge.”
There is a genuine competition to retain talent and defend yourself against speculative, short-term increases in market rates and compensation plans.Sezin Yesildag, Head of Human Resources EMEA/RBIS at Avery Dennison
Retaining employees in a high-inflation environment is a significant challenge for companies. The rising cost of living and increased competition for candidates make attracting and retaining top talent difficult. However, there are strategies that companies can implement to mitigate these challenges and improve their chances of keeping their employees.
- Competitive compensation packages
- Flexible work arrangements
- Opportunities for career advancement and development
- Fostering a positive and supportive work culture
- Open communication and encouraging employee feedback
- Providing financial support through stipends and childcare benefits
- Regularly reviewing and updating retention and engagement policies
Conversations within our HR network show that organisations in Turkey do their best to create an environment more conducive to employee retention, even in the face of high inflation. One of our local contacts suggests that the roll-out of remote and hybrid work models, where large offices are either closed completely or reduced in size and turned into shared workspaces, has somewhat mitigated the impact of inflation and higher costs.
Sezin Yesildag goes on to explain how the current economic climate influences the role of HR in Turkey:
Eventually, we need to seek out the aspirations of the talent rather than evaluating only their actual qualifications.Sezin Yesildag, Head of Human Resources EMEA/RBIS at Avery Dennison
“We must introduce cross-functional development opportunities supported by flexible benefits packages and work conditions, offer a competitive company brand value and, most importantly, create an environment of being ’one’ for the common purpose.“
Turkey is generally characterised by a competitive job market, where the demand for highly skilled and educated workers is increasing. The government has implemented various reforms to improve the country’s economic performance, which should impact the human resources sector. It will be interesting to see if the current situation in Turkey will spread to other markets and regions. This will be a real challenge for total rewards leaders to tackle in 2023.
Ipek Karataslioglu is a Senior Associate with ChapmanCG based in Ankara. As one of our key contacts in Turkey, she closely monitors the country’s economic situation and its effects on local HR leaders.