Welcome back to our Friday blog on tips for employee retention. Thanks for joining us again. This week we’ll look at the impact of pay and benefits on employee retention.
Pay and benefits are clearly important influencing drivers of our professional careers. Although not the be-all and end-all of employee retention, the figures on pay and benefits relating to retention really do speak for themselves:
- 92 percent of employees said compensation held some level of importance for their job satisfaction. 53 percent said it was “very important” and 39 percent said it was “important” (2008 Job Satisfaction: A Survey Report by SHRM).
- 55 percent of employers sighted employee retention as the main driver behind putting together a benefits plan.
While they may not always be the main factor impacting employee satisfaction, pay and benefits do matter. Studies show that benefits, such as pensions and health care, are important factors in employee decisions to stay with an organization. Also, employee satisfaction with benefits has a correlation to employee job satisfaction overall. One estimate states that among employees that claimed they are highly satisfied with their benefits, up to 80 percent of those employees also claimed to have felt a strong level of job satisfaction. For employers, this means that a strategic use of pay and benefits will very likely impact both retention and job satisfaction.
Pay and Benefits Rules to Follow
- Ensure that salary and benefits are comparable to industry standards. Research on recent trends and figures, as well as what your competitors are offering. Yearly reviews on benefits programs are recommended in order to keep them up to date. Salaries that are paid below the market rate are a prevalent complaint of employees and also a determining factor for seeking employment elsewhere.
- Assess employee satisfaction with pay and benefits. Use polls or surveys to find out from employees exactly how satisfied they are with their current pay and benefits.
- Keep yourself up to date with legislation changes. Organizations need to ensure their pay and benefits programs are following local, state, and federal laws. Amendments to the health care law reform for example are complex areas that are currently undergoing changes and will continue to do so over the next several years.
- Communicate and educate employees on their pay and benefits. Managers or HR personnel should make sure that employees are fully aware of all the benefits available to them. Providing compensation statements and holding benefits workshops or meetings are an example of the methods needed to communicate and educate employees on the benefits offered.
- Incorporate flexible workplace practices. Organizations should rethink the tired old ‘one size fits all’ policy on workplace practices. Seek for a policy that fits the different needs of the variety of employees whilst providing stability and certainty for employers. See our blog post on flexible workplace practices for more information on the topic.
Pay and Benefits as Rewards
Rewarding employees on performance is a popular tool in retention. Provide yearly salary increases based upon an employee’s performance over the year, such as completing a major project and taking on further responsibilities. In addition, organizations can provide smaller rewards for minor accomplishments throughout the year that supplement the once a year salary increases. Gift certificates to use at local businesses like restaurants, movie theatres, or stores can be given to reward great teamwork, showing initiative to complete a task, or resolving customer problems. These little extras are inexpensive and yet show huge appreciation for an employee’s hard work.
Employees Want to Feel Valued and Appreciated
At the core of all employees is the human need to feel appreciated and valued for their contribution and work. Organizations that show this value and appreciation through pay and benefits will in return receive commitment from their employees. Employees look at what benefits the workplace offers as motivation for performance and satisfaction. As an employer, what you put in and give to your employees will define how much you will get out of your employees. The organizations that top the “Best Places to Work” lists all have one attribute in common: they make a commitment to their employees and show their appreciation through a variety of benefits that excite and satisfy.
Retention Versus Recruiting Costs
In these difficult economic times it can be challenging to increase pay and benefits or maintain industry standards. However, keep in mind that the costs and the disruption to production associated with turnover and finding new employees will often far outweigh the cost of retaining employees. Many employers fail to truly realize the cost that is associated with turnover. Studies find that employee turnover costs can range from 50 to 60 percent of an employee’s first year salary, and for more specialized and high skilled positions, the cost can be up to 100 percent. For every ten managerial and professional staff to leave an organization, the loss is estimated to be around $1 million. Therefore, it is imperative to establish retention incentives for employees to avoid the ultimately more costly process of replacing employees and to avoid more far-reaching problems for the organization.
Join us next week for our last tip in this series to help improve employee retention, making accurate assessments.
Get Monthly tips to Find Better Employees and Grow Your Business
The latest actionable insights on recruitment, hiring, and performance management.