"Employee turnover is expected to hit 21% in 2014—up four points from 2013."
It’s not easy to loosen the belt after pulling through a recession that may have cut deep into your organization, but as the market continues to recover, it may be wise to extend some of this recovery to your employees.
With market optimism comes hiring, which is great for those who are adding new employees but not so great for employers who are losing top talent. Employee turnover is expected to hit 21% in 2014—up four points from 2013. Employees who feel they are not being fairly compensated for the work that they do are most likely to have wandering eyes. As employees observe the company rebounding, peers moving on to higher paying jobs, and possibly head count being added, they are likely to become less tolerant of pay inequities.
Throughout the past several years, many employers adopted strategies to make the most of their limited resources, including restricting pay increases to top performers and hard-to-fill positions and adding or expanding the role of variable pay (pay-for-performance). While these strategies may be a valuable component of an overall compensation plan, they typically do not address the entire employee population and may not be consistent with the culture of the organization.
Keep in mind, even turnover in entry-level positions is costly to your organization. Time spent finding, selecting, and training new employees reflects only a portion of the cost to your organization. The impact to productivity, quality, customer service, employee morale, and revenue can be significant.
Once you come to terms with the idea that addressing this issue of pay increases may be long overdue, what steps should be taken next?
Determine target salary ranges by position. Depending on the size and complexity of your organization, this may be a fairly straight-forward exercise. Or, you may need to first do some foundational work, such as defining your compensation strategy (for example, will you be paying below, at or above the market rate?) and pay ranges/grades, and leveraging relevant compensation data.
Determine how increases will be allocated. What data will influence your allotment of salary increases (i.e., performance, placement in the salary range, last salary increase)? Having a plan and being able to articulate that plan to supervisors and employees will increase the likelihood of employees perceiving that increases have been applied thoughtfully and fairly.
Keep a pulse on your employees. Understanding how employees feel about their role at your company, including aspects such as job satisfaction, work environment, teamwork, supervision, pay and benefits, equips the organization to prioritize resources. Conducting annual employee surveys establishes an objective and streamlined method for quantifying how changes have impacted employee engagement levels.