If a person said to you, “It is easy to reduce turnover—just pay people more money,” what would your response be?
In business, some turnover is voluntary, and some is involuntary. There are many reasons why an employee may leave their job, and some of these are unavoidable. Compensation is oftentimes a reason for voluntary employee turnover. However, compensation alone, will not retain employees who are not satisfied with their job. Aspects like employee benefits, employee engagement, and non-monetary rewards or recognition, have a greater impact on employee retention, than pay alone. Simply paying people more money, will not make an unhappy employee happy, in the long run.
The solution to turnover is not a one size fits all solution. Managers must research and find out what is important to the employees of their business. The textbook points out that extrinsic rewards can be a factor of retaining employees. Not only do extrinsic rewards retain employees, they also attract employees. The article, “Retaining key workers: Factors that can help reduce employee turnover”, advises that these rewards must be unique and competitive. Rewards like pension funds or share options are especially valuable, when employees earn more as they grow with the company. Those who may not get paid as much as they would like, hourly, see retirement plans as an additional incentive.
The article, “Trends in Employee Turnover and Retention: Keeping Talented Employees from Finding a Place with the Competition”, discusses employee engagement as a means of retaining good employees. The article goes on to explain that in recent years, businesses have realized “that the most compelling work-related motivations are those that fulfill the fundamental human needs for purpose, a sense of achievement, and recognition from others” (Goldberg, 2014). Employee engagement has also been linked to increased success and competitiveness. Along with employee engagement, good employees should be recognized for the role they play in the success of the business. Key employees are motivated when their above average efforts are recognized and rewarded, fairly. When people feel like their work is meaningful, useful, and valuable to the company, they tend to remain with the company.
Of course, pay matters. Proverbs 3:27 agrees, “Do not withhold good from those to whom it is due, when it is in your power to do it” (ESV). Employees deserve and should be compensated for their hard work. However, studies have shown that pay alone is not enough to keep valuable human capital. Organizations must realize that non-monetary factors are just as important as monetary ones. Employees want to be appreciated. They want to know that their work is valued and that they are more than just a warm body filling a seat. Some employees may be motivated by money alone, however, research supports that even those with the highest pay will leave a company if they are not satisfied with their job. Paying people more money is not the end all to employee turnover. Overall job satisfaction is the key to retaining valuable, talented employees.
Goldberg, J. (2014). Trends in Employee Turnover and Retention: Keeping Talented Employees from Finding a Place with the Competition. Graziadio Business Review, 17(3). Retrieved from https://gbr.pepperdine.edu/2014/12/trends-in-employee-turnover-and- retention/
Heneman, H. G. III, Judge, T. A., & Kammeyer-Mueller, J. D. (2015). Staffing organizations (8th ed.). Mishawaka, IN: Pangloss Industries, McGraw-Hill.
(2017). Retaining key workers: Factors that can help reduce employee turnover, Human Resource Management International Digest, 25(7), 18-20. https://doi- org.ezproxy.liberty.edu/10.1108/HRMID-08-2017-0141