We all know about the importance of employee retention, so then why are so many companies so bad at keeping their best people?
According to a study from global management consultant firm the Hay Group and the Centre for Economics and Business Research, employee turnover is going to become a much more serious problem in the future.
Globally, 161.7 million workers are expected to leave companies this year. Within the next five years, the Hay study predicts the turnover rate will grow from 20.6% to 23.4%.
To answer the turnover question, my company, an HR and payroll platform,
analyzed more than 13,000 salaries from top performers in technology, ecommerce, advertising, and digital media.
When it comes to compensation, we found there is something of a salary “sweet spot” where employees are more likely to stick around. We discovered 79.5% of employees making between $80,000 and $100,000 were still with the company two years later. Yet, those making above or below this compensation range were 45% more likely to leave.
For those below, the problem might stem from feeling undervalued and underappreciated. Those above might have too many options, especially in high-demand fields like tech. If your company isn’t offering smart perks, cultivating a sense of ownership, and developing a great company culture, you’re likely to lose these top performers.
In fact, our study found that pay for performance was an extremely important factor in retention.
The idea of incentivizing your best performers certainly isn’t new, but it’s important nonetheless. We found high performers were 116% more likely to stick with the company than low performers. Recognizing performance and paying people what they’re worth might not be flashy advice, but it’s likely to save you big money on employee turnover.
Aside from paying top performers more, there are other ways to improve your company culture, offer the perks employees want, and keep the best people around:
To keep your best people around, you need to create buy-in at the company. The best way to do this is to give your employees a seat at the table, soliciting feedback and keeping your organization transparent.
Look to companies like Square, which sends out detailed meeting notes, or Buffer, which has made all salaries transparent. Or take a page from the Danish playbook, where companies with more than 35 employees must make a seat on the board for workers.
With the rise of technology and the need for better work-life balance, flexibility is the perk of the moment. In fact, 45% of respondents to a Workforce survey indicated they would give up a portion of their salary for greater flexibility.
Offer workers the ability to make their own hours and telecommute. You will not only improve their attitudes and work-life balance, but also prove you trust your team.
Great employees don’t want to ever stop growing in their professional lives. When they stagnate, their eyes will begin to wander and the grass at other companies will look much, much greener. Offer employees professional development courses, the ability to attend conferences and workshops, or even go back to school. There’s no downside to a more educated and engaged workforce.
The future will look grim for companies that don’t take employee turnover seriously. As the economy improves, some of your best people will be out the door if your company doesn’t compensate them fairly and offer great perks to keep them engaged.