Employee compensation and retention is a critical focus in human resources right now. According to the Society of Human Resource Management, 49% of executives reported higher employee turnover throughout 2021 and 2022. Even more alarming, 93 percent of executives surveyed reported more open positions in the same time period.
It’s critical to look at different factors that affect employee retention. As human resource professionals know, compensation is one of the most important drivers of employee satisfaction and retention. Employees who feel they are underpaid are much more likely to look for other opportunities, so it’s critical for organizations to ensure their compensation programs are competitive and effective. Businesses serious about compensation and employee retention should also consider innovative approaches to increasing employee engagement and pay.
Here are 11 surprising statistics around compensation and employee retention.
1. A March 2022 study by Pew found that 37% of workers who quit said being underpaid was a major reason for leaving.
This is especially problematic as the Great Resignation continues in full force. Remaining employees are often left overworked, reporting higher stress levels, more burnout, and less workplace satisfaction. When employees also feel underpaid, this can lead to even more resignations, causing massive labor shortages and operational difficulties.
2. Employee compensation and employee satisfaction are highly correlated.
In fact, just a 10% increase in pay leads to a 1.3% increase in job satisfaction according to a study by Glassdoor. This demonstrates that even small increases in pay can lead to higher levels of satisfaction and retention.
3. Compensation is the number one driver of employee engagement.
According to Payscale, employees are more engaged when they are paid well. This makes sense. Employees who are living paycheck to paycheck and worried about putting food on the table or paying a bill that’s due before payday are more checked out. Employees are more likely to call off work to engage in activities that give payouts immediately, such as delivery or the use of rideshare apps. In fact, about 62% of millennials are willing to quit their job in the next two year to work in the gig economy.
4. Another study found that 56% of employees would leave their current job for a 20% salary increase elsewhere.
Businesses are losing employees at alarming rates. Compensation and employee retention are clearly correlated, making it more important than ever to offer innovative payment solutions to address employee needs.
5. A study by WorldatWork found that total cash compensation (salary + bonuses) has the biggest impact on employee retention.
Employees want better compensation packages. This can include innovative and on demand pay so that employees can have greater control over their finances.
6. A compensation study by the Hay Group found that employees who feel they are paid fairly are 1.3 times more likely to stay with their current employer.
They are also more likely to be engaged and productive at work, which can help an organization’s bottom line.
7. A study by Aon Hewitt found that organizations with a highly effective compensation program have an average voluntary turnover rate that is half of that of organizations with ineffective compensation programs.
This statistic shows that compensation programs are more important than most human resource managers might think. It isn’t always about how much is being paid, but how employees are being paid. Compensation should be innovative, quick, and on demand for it to be highly effective.
8. Gallup estimates that the cost of replacing an individual employee can range from one-half to two times the employee’s annual salary.
Given all of the data about employees’ willingness to quit when undercompensated, this shows that employers cannot afford to not pay people a competitive salary. In fact, according to Gallup, a typical 100-person organization could experience turnover costs as high as $2.6 million per year. Plus, there are non-monetary effects to this turnover. Losing your best people can break down internal morale and damage customer relationships.
9. A study by Payscale found that employees who believe they are underpaid are 49% more likely to look for a new job in the next year.
Employees simply must feel valued. The statistics are clear: employees who feel underpaid and taken advantage of will try to leave your business, costing you a ton of money in recruitment, improving retention, and keeping up morale.
10. Employees are much more likely to work for – and stay – with an employer offering same day pay or earned wage access. 72% of employed Americans want access to their wages before payday.
Getting paid on demand is one of the least expensive but most powerful benefits you can offer employees. 76% of employees feel financial stress, and alleviating that stress improves engagement and retention. And payout cards are the most effective way to offer this benefit to employees.
11. Employees prefer employees who offer payroll flexibility; in fact, Visa found that 73% of job seekers would prefer an employer offering a payroll card.
Employee payroll cards allow flexibility to employees, especially those who are paid by traditional paper checks and those that are under-banked. They are a modern solution to payroll, allowing employees to spend or withdraw their earnings on demand.
A New Way to Compensate and Retain Employees
Compensation and employee retention are clearly related. It may not always be possible to increase your company’s budget to pay additional wages. However, it may be helpful to look for other innovative solutions that can help your employees stay satisfied. This can lead to increased loyalty, which can result in less staff turnover.
One way to help retain employees is the use of innovative and fast payout solutions, like payment cards offered by Juice. Payment cards offer a number of advantages like the ability to offer same-day compensation, which can help alleviate financial stressors that may lead an employee to look for other opportunities.
What’s more, payment cards are a convenient way for employees to access their compensation without having to wait for direct deposit or endure the hassle of cashing a check. For employees living paycheck to paycheck, this is a major benefit that can help keep employees satisfied and loyal to the company that they work for.
Learn more about Juice today to discover how our compensation solutions can help your organization retain its top talent.