Right now, businesses are operating within the longest sustained economic expansion in history.
On the whole, that has been very good for the bottom lines of most companies. At the same time, however, all of the prosperity has produced a labor market that features the lowest unemployment rate anyone's seen in 50 years. That top-line figure represents a hiring environment that's proving to be a real obstacle for sustained business success.
The unemployment rate is not the only issue, though. A rapid realignment of the overall economy away from manufacturing and towards information-based industries is producing some difficult and worrisome skills gaps within the existing labor pool. That, alongside the shifting priorities of workers, now makes finding ways to reduce turnover and keep top talent a top priority for every business.
Although many of today's companies are now aware of things like the effect of a high-quality onboarding experience on employee retention, as well as the importance of corporate values and culture, many ignore what could be the most critical part of keeping top performers in the fold: compensation.
It plays a huge role in an employee's decision to stay or leave, and salary alone is just a small part of the equation. To help businesses craft compensation packages that encourage top talent to remain, here are five ways to tailor compensation for the best employee retention outcomes.
The first important feature that should form the bedrock of any retention-focused compensation plan is a comprehensive employee benefits package. Getting this part right plays an outsize role in retention outcomes, with surveys finding that 78% of employees are more likely to stay with a company due to its benefits program. In business, that's as close to a sure thing as you're ever likely to encounter.
To begin with, create a package that offers all of the generally-expected benefits, including:
It's important to recognize that every workforce has different needs, however. That means it's advisable to conduct surveys of existing employees to determine which benefits matter most to them. That will help in the process of crafting the best package from a retention standpoint.
Related: A trending benefit many employers are providing as an alternative to the standard two weeks' vacation time is unlimited PTO. That's right – unlimited. Read our full guide to see how it can benefit your company and how it might be more lucrative for your bottom line in the long run. |
Today's workers, particularly those drawn from younger demographics, now value professional development as a key factor in their employment decisions. The statistics are staggering. According to polling firm Gallup, a full 87% of millennials rate professional development opportunities as important to them. Older workers aren't far behind, either, with 69% of that demographic saying the same thing.
From a retention standpoint, that makes offering training and education subsidies a valuable tool in the drive to keep workers happy. For the average company, it should be possible to create a robust training initiative consisting of online coursework or on-the-job education, which may be managed by existing human resources staff. To augment this, it's also a good idea to offer tuition reimbursement to employees that wish to pursue educational opportunities outside of work.
Businesses can even use such a program to further other aims, such as increasing gender and racial diversity in their ranks by upskilling existing employees to work in new fields. Many technology firms are doing this now as a way to increase female participation in STEM-related fields that are now overwhelmingly male-dominated.
Another excellent form of compensation that serves employee retention goals is one that few companies pay much attention to – employee recognition. It's a critical oversight, especially when you consider that surveys have revealed that as many as 94% of employees that are recognized for their work by their employers report high satisfaction with their jobs.
To take advantage of that, it's an excellent idea to craft compensation packages that feature things like employee bonuses and other performance-related benefits. That serves the dual purpose of providing a means of direct service recognition as well as incentivizing high productivity.
It's important to realize, though, that not all employee recognition needs to come in the form of a monetary benefit. Sometimes, a simple weekly shout-out or an annual employee awards dinner can do just as well. The best approach will vary by industry, but one thing is certain: the more you recognize your employees' valuable contributions, the more loyal they will be.
Although it should be obvious, one of the most effective things a business can do within a compensation package to improve retention is to create an employee stock purchase or vested ownership plan. Doing so gives every employee a direct stake in the performance of the business, which will encourage them to stay and work hard to increase the company's value.
For maximum retention effects, it's important to engineer any such plan with direct links to time-of-service and other relevant metrics. That serves as a guarantee that employees will remain with the company to achieve maximum financial benefits since they'd pay a direct penalty for departing before they're fully vested in the plan. It also serves as a key defense against employee departures, especially at the executive level. With some surveys indicating that 70% of executive-level employees are on the lookout for new opportunities, the importance of this can't be overstated.
Anyone who has studied the topic of employee retention can tell you that it is inextricably linked to employee engagement. The reason is simple. Engaged employees tend to be happy employees, and happy employees don't leave. That relationship is significant because it means that businesses can use engagement strategies to increase retention.
One of the ways to do that within a compensation package is to focus on adding perks related to enhancing an employee's work/life balance. Experts agree that promoting work/life balance leads to better engagement results, and therefore works towards retention goals. Consider adding the following perks to employee compensation to do it:
Related: Are you ready to implement a VTO program for your employees, but not sure how to get started? Streamline your policy today with our easy-to-follow VTO form! |
It's no stretch to say that employee retention is now vital to overall business success. In fact, a high retention rate provides bonuses to productivity, decreases recruiting costs, and ensures that vital knowledge and skills don't leave the organization. Although each company will have different retention goals and needs based on its specific situation, the five compensation areas detailed here are almost always applicable in all cases when looking to improve retention. On top of that, they tend to be far more cost-effective options than increasing salaries across the board.
For those reasons, any business looking for ways to improve their employee retention rate should consider making these changes to their compensation packages right away. With unemployment at historic lows and the hiring environment very much in favor of job-seekers – they're a small price to pay to retain the top talent needed to succeed.
Are your employees as engaged as you think they are? Why not use employee engagement software to help you develop engagement procedures to make sure their happiness is top-of-mind? Better yet, download our free one-sheet of employee satisfaction questions to ensure you're not only checking in on your employees, but that you're asking them the right kind of questions!
Andrej is a digital marketing expert, editor at TechLoot, and a contributing writer for a variety of other technology-focused online publications. He has covered the intersection of marketing and technology for several years and is pursuing an ongoing mission to share his expertise with business leaders and marketing professionals everywhere.
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