Experts and analysts have been talking about the low unemployment rate for quite some time while forecasting the consequent retention issues. A recent study by PayScale entitled Will They Stay or Will They Go? examined input from over 7,000 employees. What it found was that those issues are impacting organizations right now.
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Perhaps the most revealing finding was that 66% of organizations agree or strongly agree that retention is a growing concern. This is a 7-point increase over last year. Additionally, 47% of human resource and business leaders say that the job market is responsible for their increased turnover rate.
What Makes Them Leave
The top three reasons employees left their organization include personal reasons, higher pay elsewhere, and the need for professional advancement. Each of these saw an increase over last year, as can be seen in this chart:
Compensation
Moving on to compensation, as you can see, 2018 saw that a need for better pay contributed to a high turnover increase by 8 points. This trend hardly comes as a surprise. Typically, when unemployment goes down, wages go up. However, research shows that this has not been the case. The Will They Stay or Will They Go? report reinforces this trend, finding that 69% of employers estimate an average wage growth rate of 3% or less.
Higher turnover, then, seemed like an inevitability—especially when employees are in high demand.
Advancement
The need for professional advancement increased 6 points. This reinforces findings that we reported in January concerning the relationship between a lack of advancement and turnover. That study suggested that a well-thought-out system of internal promotion could increase retention, and the Will They Stay or Will They Go? report shows that the problem is getting worse and needs to be addressed.
How Organizations Battle Retention
The study found that top-performing organizations* used raises, title changes, variable pay, and benefits to increase retention rates. However, not every organization can afford to make these changes. Check out the difference between top-performing organizations and all organizations in this chart:
*Top-performing organizations are defined as those that are number one in their industry and exceeded their revenue goals in 2018. Twenty-three percent of respondents fit these criteria.
Flexibility
In addition to increased base pay and other benefits, many organizations are also trying to be more flexible to retain their workers. Thirty-eight percent of organizations reported offering flex time, 32% provide paid family leave, and 10% allow a 4-day workweek.
The Benefits Challenge
We reported in January that although many large organizations can attract and retain talent with a range of costly benefits, small businesses cannot keep up. Another article explored the problem of a one-size-fits-all benefit program that may feel overwhelming or unattractive to new employees with differing needs. Two things are clear: Benefits seem to be a critical part of employee retention, and they need to be strategically deployed.
Survey Methodology
The 2019 Compensation Best Practices Survey gathered responses during November and December 2018. There were 7,030 respondents. For more results, including pay transparency and developing pay brands, check out the full results here.