Eased travel restrictions since the pandemic have led to a surge in demand for aerospace and defense (A&D). In fact, the aerospace industry saw a more than 150% increase in international traffic growth in 2022, according to the International Air Transport Association. And with several countries supplying defense equipment to the war in Ukraine, the defense sector also is experiencing similar growth. While both sectors are expected to experience long-term growth, they may still be affected by geopolitical, environmental and technological factors.
Additional factors are causing both industries to reconsider the way they approach rewards. For example, the conflict in Ukraine has caused international flights to take longer routes, which is imposing financial restraints on the aerospace market. The aerospace sector also is being pressured to meet carbon zero emission goals by 2050. Hence, several aerospace organizations are partnering with technology investors or energy and automotive companies to make their operations more sustainable through digital means.
Meanwhile, the defense market is gearing up to maximize its two, rapidly growing subsegments: airborne defense and autonomous aircraft. Defense organizations are concentrating on automation and innovation to produce technologies that will support the changes in these subsegments.
These market developments are spurring A&D employers to rethink their talent attraction and retention strategies.
Like so many other industries, A&D is grappling with a shortage of qualified talent, especially among employees with skills in data science, digital technology, mathematics and engineering. Furloughs and early retirements that occurred during the pandemic led to high turnover across the sector, with many employees being reskilled and prospective candidates rethinking their career paths.
This talent shortage was made worse with cuts to training programs and related funds. By 2025, it is expected that there will be a gap of 34,000 pilots worldwide, with North America, Asia Pacific and the Middle East experiencing the largest shortages. In Europe, Latin America and Africa, the supply and demand of pilots is expected to balance out in the next three to four years, but this may remain uncertain for Europe because some European airlines have suspended training.
A&D organizations have started to realize the gravity of the situation and begun to take on actions to drive talent attraction and retention.
01
Recruitment and training programs focused on digital and technological skills will help A&D organizations cultivate a new crop of qualified talent to support innovation and automation objectives. Some A&D organizations already are partnering with universities and engineering schools to attract prospective candidates once they have graduated.
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Improving the employee experience, defined as “the sum of all the touchpoints and moments that matter between employees and their employer,” can help A&D organizations attract new talent and even encourage retention. Enhancing the employee experience may feel overwhelming at times, but a good place to start is listening to employees’ needs to design appropriate workplace programs.
Eventually, an improved employee experience is expected to yield better outcomes for the business. In a recent WTW poll, organizations with better employee experiences reported being 2.3 times likelier to have higher productivity than their industry peers, and more than 90% said they are likelier to have a lower annual turnover than their peers.
Meanwhile, focusing on environment, social and governance (ESG) goals helps enhance organizations’ public image. As a result, these companies tend to be more attractive to candidates who also look for employment opportunities with organizations that uphold ESG considerations.
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A&D organizations also are adjusting salaries to retain critical talent, especially during a time of persistent inflation. In fact, increasing the salary budget has become one of the most common actions taken by employers in the UK to address a competitive labor market and tight economy (Figure 1).
Moreover, pay and bonus have been cited as the top factor that employees consider when it comes to moving to a different employer or different regions (Figure 2).
If you were looking to move to a new job at a different employer, which of the following would be more important to you?
| Global | Asia Pacific | Europe | Latin America | North America |
|---|---|---|---|---|
| Pay and bonus | Pay and bonus | Pay and bonus | Pay and bonus | Pay and bonus |
| Flexible work | Flexible work | Flexible work | Job security | Job security |
| Health benefits | PTO and broader leave | Sense of purpose | Learn new skills | Flexible work |
| Advance in career | Sense of purpose | Relationship with co-workers | Health benefits | Retirement benefits |
| Sense of purpose | Advance in career | Advance in career | Flexible work | PTO and broader leave |
| Retirement benefits | Learn new skill | Retirement benefits | Retirement benefits | Advance in career |
Source: 2022 Global Benefits Attitude Survey
The A&D sector also appeared to follow salary increase patterns this year based on the findings of our December 2022 Salary Budget Planning survey. In France, the average salary budget increase in the A&D industry is 4.1%, while for Germany and the U.S. it is at 4.6%. Our 2023 median salary budget forecast across the general industry is 4%, indicating that salary budgets in the A&D sector in some countries are well within market range. The U.K. A&D sector even exceeds the mark with a salary budget increase of 5.1%.
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Participants in our recently conducted pulse survey on Work-From-Home expenses said that nearly half (49%) of their employees are on hybrid work arrangements, with only 21% completely working remotely (Figure 3).
This shows that organizations worldwide are becoming more amenable to flexible work arrangements, and the A&D industry is following suit. In fact, most employers in the A&D industry are introducing time-based flexibility through hybrid working, where they require employees to report onsite two days in a week. Only a few do not impose any minimum number of days, but it is rare for an employer in the A&D industry to require employees to report to the office for five days. It is worth highlighting that hybrid working arrangements tend to be more prevalent for head office or corporate-type roles than for employees who work in production roles.
The A&D industry is taking measures to respond to the current state of its labor market. Industry employers also are attentive to the wider trends happening across the global compensation and benefits landscape and are using these developments to adapt measures that will encourage talent attraction and retention. Organizations in the A&D industry can better enhance this approach with broad market data that allows them to compare their approaches objectively with their peers, while at the same time, ensuring that their employment practices remain responsive to the needs of their workforce.
