How Pay Rates Impact Employee Retention

10.11.16 | Management Tips

Has your company been suffering from high turnover? Are you stumped on why many employees seem to be leaving their positions so often? Are you even having trouble attracting new employees? Read on to learn what you can do.

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Why is there employee turnover?

When an employee takes a position with a company, there’s a lot that goes into that decision job details, whether they are in line with the ethics of the company, travel distance, work environment, and more yet the most crucial piece is the compensation package. Many factors contribute to high employee turnover as well, but that compensation is the number one reason employees leave their positions.

It can be especially frustrating for employees who feel as though they have hit the top of the pay scale you might see a lack of motivation, lesser quality work, and eventually, new job offers. It’s especially important to find a way to keep these employees, as they most likely have been with you for some time and know the ins and outs of your business. Though compensation might not be the only factor in determining whether an employee stays with your company, it could end up as the.

What can you do to lower turnover?

Naturally, if you increase your pay rates, you’ll likely increase employee retention. However, what if you can’t afford to pay more? Salary and wages are a huge part of a compensation package, but there’s more that goes into it vacation time, health insurance, 401K match, and more are all contributing factors that employees consider. If you can’t afford as much as your competitors, you have to find a way to offer a competitive package that will encourage employees to stay with you rather than move on.

There are ways to offer a better package without spending more money. You could try the following:

  • Offer more benefits such as more vacation time, better health coverage, a fun environment to work in, etc.
  • Help reduce your workers’ payroll taxes with retirement and healthcare plans that allow them to contribute part of their earnings tax-free.
  • Offer monthly, quarterly, and yearly bonuses and raises it helps your employees see that they are moving ahead and not staying stagnant.
  • Make sure the wages and the total package is fair for the amount of work the employee will be doing and for the industry your business is in.
  • Avoid employee burnout don’t let employees work a ton of hours without compensating them correctly.
  • Try increasing wages one role at a time. If you know a particular position is stressful and much work, consider raising the wage for that specific role first and see what type of talent you can attract and retain.

It is essential you offer a competitive package to increase employee retention, and that doesn’t always mean you’ll have the highest pay rates. Try some of the above suggestions for your business, and always be sure to check the value of your packages against competitors to ensure you’re at an equal or higher level.