3 Ways a Strong Compensation Strategy Will Help Retain Talent

4.1 years. That’s the average length a person stays at their company. This short stint may seem absurd to older generations, but now, people are demanding more out of their employer and workplace – and leaving if they don’t get it.

Many leaders prioritize company culture and the employee experience to retain employees.

In addition to these strategies, consider establishing a strong total compensation package, which will help you further develop a people-first approach to your business initiatives and, in turn, retain your top talent.

Competitive Pay vs. Total Compensation: What’s the Difference?

The terms “total compensation” and “competitive pay” float around when discussing efforts to help attract and retain talent. So what’s the difference?

Competitive pay is paying above market rate for a position. Companies take industry, job title, location, experience level, and job availability into consideration when determining a salary offer.

However, this strategy focuses on the short game instead of the long one. While offering competitive pay can help you attract top talent, it may not contribute to employee retention. That’s because people stay at a company for the culture, not the money, so it’s best to make competitive pay one part of your compensation strategy.

Total compensation, on the other hand, goes beyond salary and bonuses. It also includes health and life insurance, retirement benefits, stock options, office stipends and reimbursements, professional development opportunities, and other perks that help your organization attract, develop, and retain the best talent.

Ultimately, your best bet is to develop a strong total compensation strategy that provides employees with the salary and benefits they need to be their best selves in and outside of work.

Want to learn more about creating a total compensation strategy?

Read how here

How a Strong Compensation Strategy Will Help Retain Top Talent

Employee retention can be difficult to navigate. In fact, 63% of companies believe that retaining employees is harder than hiring them. Luckily, research shows that a fair

compensation strategy not only enhances retention, but also improves employee performance and morale. What’s more, people aren’t always focused on pay, but instead many care about aspects that don’t require monetary investments on your end.

Continue reading below to discover three ways a strong compensation strategy can help retain your top performers.

1. It Makes People Feel Valued

If you’re a good employer, your people will be loyal – to a certain point. But if you’ve developed a competitive pay strategy to attract new talent without acknowledging your existing team, you will cause a divide between your people.

Insider notes that “salaries for new hires are 7% higher, on average, than the median pay for people already employed in similar positions. For many in-demand occupations across tech and finance, the disparity is in the double digits." The result is that veteran employees leave for better-paying jobs, “depriving companies of the people with the most institutional knowledge.”

To combat resignations, psychologist and author Adam Grant suggests companies reward their veteran employees’ commitment through retention raises and benefits granted to new hires. Inc notes this play to spend a little now will help you save a lot more later: “Voluntarily spending more for talent might seem like a tough sell, but when you compare the price of a pay increase with the costs associated with losing a seasoned employee and then hiring someone new in the current job market, retention raises may suddenly be a bargain.”

In short, making compensation adjustments will not only help your organization, but also signal to your current employees that you value their loyalty and commitment to their work.

2. It Boosts Employee Productivity and Wellness

During the Great Resignation, people left their jobs (sometimes without another lined up) for a number of reasons. Those who returned to traditional employment cited an adequate total compensation package as a top factor.

A strong compensation strategy not only attracts talent, but also makes your people want to stay. Of the benefits you can offer, flexibility ranks as one of the most desired. According to FlexJobs’ annual Super Survey, 80% of employees said they would stay with their company if they had flexible work options.

When you focus on providing a robust compensation package, you’re adopting a people-first approach, which not only benefits your employees, but your company as well. By doing so, you are:

• Promoting work-life balance, which results in happier, more fulfilled employees
• Improving your employees’ quality of life, including helping them adopt a healthier, less-stressful lifestyle
• Providing employment opportunities to all, including working parents and those with chronic disabilities
• Focusing on how your people work best (check out the chart below on productivity)

The majority of people believe they’re more productive working from home than traditional office environments. Knowing this can be a win-win for employees and organizations alike.

3. It Acknowledges Life Outside of Work

Gone are the days when employees clocked into work, completed their nine-to-five tasks, and went home. With the rise in remote and hybrid work, schedules have become complicated and sometimes exhausting. In fact, employees who feel burned out are 2.6 times more likely to leave their current employer.

People also want to feel like they belong at work; BetterUp reports that excluded employees have a 50% higher rate of turnover than employees who feel they belong, costing organizations about $10 million annually per 10,000 employees.

So how do you combat burnout and promote belonging, all within your compensation strategy? Your package needs to include benefits that acknowledge that your employees have lives outside of work. Examples include:

• Salary transparency to help ensure fair and equitable compensation
• Insurance that provides free or heavily-discounted mental health services
• Parental leave that covers any addition to family
• Vacation and sick time (that you encourage your employees to take)
• Bonuses, commissions, and merit pay to reward your people
• Office stipends to support your employees, no matter where they work

By doing so, you signal that you not only care about your workforce as employees, but also people with lives outside of your office or virtual calls.

Stay Competitive By Prioritizing Your People

When you consider the expense of consistent churn, as well as its detriment to employee productivity and morale, deciding to focus on your people is a no-brainer. One sure-fire method to do so is creating a strong compensation plan. Whether you choose to reward your employees with competitive pay or instead add desired employee benefits that don’t affect your budget, your people will feel valued, acknowledged, and supported as they strive for personal and professional success.

A data-based approach to compensation and pay equity will allow you to mitigate any bias already in your payroll and create a total rewards strategy that is both fair and competitive. Interested in learning how to get it done?