Employers everywhere are facing an ultra-tight labour market: This past summer, the unemployment rate in Canada hit a record low of 4.9 per cent for two months straight. At the same time, job vacancies are at an all-time high, and wages haven’t kept pace with inflation. Hardest-hit sectors, like the health-care industry, hospitality and construction, risk collapse if they can’t attract new employees.

Here, Emily Brine, managing director of firm operations, talent and culture at KPMG in Canada, and Trisha Neogi, senior consultant and compensation lead at human-resources consultancy Bright + Early, discuss what’s driving our current labour shortage and what it will take to retain the next generation of workers.

TRISHA NEOGI: On a macro scale, Canada has a smaller population than the U.S., which is one reason why our labour market is a lot tighter. As well, since the pandemic, more people have the opportunity of remote work, so it’s become much easier for Canadians at all talent levels to work for international organizations. The population is also aging—the number of people reaching retirement age has now hit a record high—and we’re not replenishing it fast enough. Companies need to pull younger talent into the workforce and work on improving retention.

EMILY BRINE: If we’re talking about Gen Z, I think we have seen some different expectations. Millennials paved the way for better flexibility and well-being at work, but Gen Z has prioritized mental-health benefits and worklife balance and is simply more direct about it. We’re dealing with a demographic that wants to be flexible. They want to work in different places and have more control when it comes to their hours.

T.N.: Gen Z doesn’t feel like they owe their soul to an employer, and they make decisions accordingly. They’ll come in, and if they like it, great, they’ll stay. But if not and they have the privilege to leave, they’re more than happy to work at another company or even start their own venture. Companies will have to lean into flexibility and value alignment in order to actually attract these folks and retain them.

E.B.: Gen Z also wants to have a voice in the organization and its strategy. It’s about purpose, meaning and what they are contributing to in the grander scheme of things. Not that other demographics don’t want that, but it’s a lot more prevalent in the generation coming forward.

T.N.: If a company says that it values diversity, equity and inclusion, this generation will hold it accountable. If companies can walk the walk, that’s a great way to pull talent. In terms of retention, it’s having not only the cool office culture but also great benefits, perks and compensation. When we look at results from engagement surveys, it’s clear that employees want employers to invest in them through growth opportunities and are demanding to be paid fairly. The initiatives our clients are taking include getting strategic about compensation and perks and ensuring they’re measuring performance that’s tied to specific goals.

E.B.: Mental health and well-being are very important to this generation. At KPMG, we give all our employees and their dependants a $2,000 mental-health credit, which they can spend on a variety of providers, including psychologists, social workers and marriage and family therapists. When we ask people what they value most with respect to recognition and rewards, time off to recharge comes up time and time again. So we’ve offered additional paid days off—we did long weekends throughout the summer to give people that extra time for well-being. And for mobility and flexibility, we’ve created a program where you can work from different countries for periods of time. We’re trying to be agile and respond to the needs of this new generation.

T.N.: Focusing on growing your employee base is critical in navigating the specialized-talent shortage. It’s about hiring new people, investing in them and giving them the right opportunities to develop their careers with the organization. But if companies can get really sound on their benefits and perks and have more flexibility in what they offer, they’re attracting not only one specific generation but a whole swath of others too.