The Impact of Compensation on Employee Retention

Blog / The Impact of Compensation on Employee Retention

Plus the Benefits of Great Employee Compensation

Employee retention is key to the success of any business. And let’s face it, no one wants to be in a constant negative feedback loop of hiring. 

And one of the reasons many employees leave a job is because the work outweighs the compensation. No one likes to put more into something than they are getting out of it. 

Employment is a classic give and take relationship. 

Your employees show up each day and work hard, they get a salary and benefits in return and vice versa. 

So if an employee feels like they aren’t being compensated appropriately, they’ll hand over their two weeks notice, making today’s employees more bold. Gone are the days of being loyal to a company because you felt you had to be. Today, workers are willing to go after what they want. And that means you have to be willing to offer competitive benefits to attract employees and keep them!

Sharing is Caring

But wait, aren’t we all about culture, you ask? Yes! Your compensation package is part of your company culture. Many employees view compensation as a sign of whether a company cares about them as more than just a warm body doing the job. People want to know that a company cares about employee needs. And those needs include being able to pay the bills, get the healthcare they need, save for retirement or take a vacation when they need a mental health break. What you have to offer employees says a lot about your company culture. 

We’ll also note that while this has always been true, it’s even more true during the time of the Great Resignation. The pandemic really put things into focus for people and they are unafraid to get what they want, even if it means taking the plunge into the job search market. 

Wait, What Do I Get in Return?

Besides higher retention rates, you may be asking what else do you get out of this deal? It might feel like you are shelling out more just for people to do a job. But in reality, great compensation packages offer more benefits to companies than just better retention rates.

When employees feel appreciated for their hard work, they actually become more productive and do better work! Simply put, happier employees are better employees. These positive attitudes are contagious around the office and that positivity becomes ingrained in your company culture.

Teamwork Makes the Dream Work 

Bet you’ve heard that famous quote from John C. Maxwell before! When a team can bond, they do better work. In other words, if your office feels like a revolving door, it can really put a damper on camaraderie and team spirit in the office, and teams just don’t work as well together. Not to mention that it really adds stress to those who have to fill in the gaps while you wait for someone new to fill a position. 

When retention rates are higher, employees really get a chance to get to know one another. And that team building can lead to something great–better ideas and less tension in the office. And that camaraderie can have a positive effect on your workplace culture and your bottom line! 

Compensation Considerations

So what should you be considering when it comes to creating a worthwhile compensation package for employees? Here are some benefits you should think about:

  • Salary and offering competitive pay
  • Health insurance
  • Life insurance
  • Paid vacations and holidays
  • Retirement package
  • Tuition reimbursement
  • Goal tracking and rewards (this can be especially helpful for a sales team)
  • Opportunities for personal growth

Take a look at what other companies in your industry are offering. This will help you decide what your own compensation package should look like. And remember, when talking about your compensation with prospective employees, don’t broach it as just what they get in return. Rather, talk about how it fits in with your company culture. 

Once you implement a great compensation package, you’ll see a more positive workplace culture and higher retention rates. And by the way, your HR department will thank you.