Imagine this scenario. Your carefully assembled team has finally begun to mesh. Productivity levels are up, ideas are flowing and everyone appears excited to be at work. You happily think of your workplace as buzzing with positivity and activity, and then – out of nowhere – one of your top-performing employees gives two weeks’ notice. You’re left wondering, “What happened?”
To prevent this scenario from becoming reality, employers must address why employees quit. A recent survey by The Harris Poll found that one-third of employees quit their jobs because they weren’t learning new skills. However, survey respondents also reported that lack of career development came in second to low pay.
No one likes saying goodbye to a great employee. Fortunately, you can take steps to limit the chances of that happening. The first step is to determine if you’re paying employees enough – as compared to the market and likely competitors.
Incorporate Competitive Compensation Strategies
When a new hire joins the team, many employers have done their homework on determining the right salary offer. Over time, however, many employers stop benchmarking the salaries of current employees to assess whether their increased level of experience or additional skills warrants a pay raise.
Performing irregular employee salary comparisons within the same department or in similar roles can cause problems, which are usually exacerbated under tight labor market conditions. For instance, if you’ve had difficulty hiring for specific roles, new employees may have much higher starting salaries or may even be paid more than their more experienced counterparts in similar roles. In addition to salary compression, long-time employees may be worth much more to the organization than their existing salary band allows.
Not resolving these problems can lead to your most valuable employees feeling underappreciated and more willing to accept a more lucrative offer from another employer. So how do you address these issues?
Once you realize a problem exists, review the team’s salaries. Your data should identify whether an employee who requests a pay raise may indeed be paid less than market value. To correct this, first determine what a competitive salary range is for your market and each position. The salary worth of each employee may differ based on the person’s skills, experience and knowledge of your company – notable considerations as you perform your salary analysis. Use a labor market analysis tool to help determine a proper salary range and the level of demand for specific roles in your area.
Correcting long-term salary discrepancies may feel daunting at first. But remember, you’re doing this to retain your best employees and to create an environment where people feel valued for their work. Keep these four things in mind:
- Compare your team’s salaries to those for similar roles in your labor market. This will help you decide how competitive your pay is. If your pay is at or below market value, you may be at a higher risk of losing employees to organizations willing to pay more for an in-demand skill set.
- Employees who are paid well stay longer. If you have outstanding employees who would be difficult to replace, you might consider paying them above the median salary for their role. If high-performing employees feel that you recognize their talent, they’re likelier to continue producing high-quality work and remain with the company. A few shoutouts can help, too.
- Benchmark salaries frequently. Depending on the competitiveness of the labor market and whether your company has a high turnover rate, you may need to review salary data more than once a year. Doing so will help you quickly identify any retention risks.
- Keep pay equitable between new hires and existing employees. To prevent new hires of similar skill and experience levels from being paid more than existing employees, find other ways to compensate new hires. Instead of raising the starting salary, you could offer hiring bonuses to new employees. You can also reward current employees with bonuses for meeting certain milestones or non-compensation perks.
While many employers give annual performance-based raises, the standard 3-5 percent may not be enough to correct a salary range that does not reflect the current labor market. If you’re having trouble keeping necessary roles filled, you may be paying employees below their market value.
Well-Paid Employees Result in More Engaged Employees
When employees are not stressed out about their pay and enjoy their work, they are more motivated to perform at their best and less likely to be tempted by another job offer. Creating long-term career opportunities for your employees – and that includes competitive pay – means you’ll spend less time and money recruiting and training new employees. Instead, you’ll have more time to focus on ways to increase your company’s revenue and productivity.