How to keep employees from quitting: is it only about the money?

“I don’t care too much for money, ‘Cos money can’t buy me love . . . ! ”

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Most people would do an eye-roll over the first line of that 1964 Beatles classic. Everyone cares about money! Employers are only too aware that when it comes to salaries, even a moderately competitive offer can tempt an employee into leaving his current position. So, is money the all-important factor in retaining people? It’s not that simple anymore. The Beatles may have had a point, after all.

The money puzzle

Research on the connection between employees’ income and their emotional well-being keeps throwing up new and varying insights. In 2010, Gallup Organization published a ground-breaking study in the U. S. which concluded that rising incomes were significantly linked to increased happiness. However, employees’ overall sense of satisfaction with their lives did not seem to proportionately rise beyond annual earnings of $75,000.

A larger and more nuanced study in 2020, published in PNAS (Proceedings of the National Academy of Sciences) contradicts Gallup’s research. This study states that there is no specific value at which money ceases to matter to a person’s well-being. Why so? Matthew Killingsworth, the study’s lead author from Wharton Business School, says high-earning employees may be happier as they feel more secure about their lives. "When you have more money, you have more choices about how to live your life…Across decisions big and small, having more money gives a person more choices and a greater sense of autonomy." The study concluded that higher incomes could continue to positively impact people’s day-to-day well-being.

It’s raining resignations

Then again, life has a way of upending mankind’s best-researched assumptions. Take what’s happening now in organizations worldwide during the seemingly never-ending pandemic. We’re talking, of course, about the alarming increase in resignations, even among well-paid employees. Harvard Business Review, for instance, reports that the highest rate of increase in resignations (over 20% in 2020-21) has been among 30-45-year-old mid-career professionals.

There are multiple reasons reported for “The Great Resignation”, and money is not necessarily a top factor. Across nations, employees (particularly from the technology and healthcare sectors) have quit, citing burnout due to unprecedented workloads. Indian tech leaders Wipro, Infosys, and Tech Mahindra saw a whopping 20% jump in attrition in the quarter ending September 2021. Among younger workers, a feeling of foreboding and anxiety about the future may be factors driving resignations

What does this mean for organisations struggling to retain employees? That, while higher pay is a powerful incentive for workers to stay, importantly, there are other, intangible factors that employers and recruiters need to reflect upon. This is particularly significant for small businesses and nonprofits, where losing talented, hardworking employees impacts an organisation in multiple ways, from the cost of recruiting, onboarding, and training a new candidate to potential errors in customer service and lowered morale among existing employees.

“The overarching message of ‘The Great Resignation’ is not just doling out better pay or promotions in the traditional sense. Just as people are looking to lead a better quality of life, employees experience a heightened sense of accomplishment when companies invest in making them better, smarter, and future-ready.”

Satyajit Menon (SVP & Head, People and Culture, Hero Vired) in Forbes

Building engagement among employees

Even in pre-pandemic times, employees who felt uninvolved with their work have been the ones most likely to leave. A 2014 Forbes report said that people who quit for a new job typically get a pay raise ranging from just 10% to 20%. On the other hand, enthused and engaged employees feel deeply connected to their organisation; they would consider leaving only for a substantially larger hike in pay. There are several tangible options an organisation can consider to leverage these insights.

Getting salaries right:

Understanding market trends and compensation benchmarking (or salary benchmarking) are best practices adopted by organisations to retain talent. Use salary surveys from reliable sources or hire a reputable consulting firm to provide accurate data to help you execute an internal salary benchmarking project. Using data from this exercise, restructure your compensation packages sensibly, if necessary.

The engagement factor:

In today’s quick evolving work culture, it’s essential to show appreciation frequently. One way to do this, for instance, is to provide people with opportunities to get involved in new projects. Also, get managers to encourage self-development and focus on employees’ strengths.

Brainstorm with leaders over initiatives to nurture employees’ social, physical, and financial well-being. Young people seek employment that allows them the flexibility to pursue personal goals and activities. Family time is also a priority. Businesses that acknowledge these needs are likely to face lower attrition.

Upskill your workforce:

Invest in your employees through upskilling programs with appropriate learning partners. Enabling workers to learn, grow, and remain relevant in the industry is a crucial element in earning their loyalty.

Invite feedback:

Don’t assume that your employees are happy ­– rather, create an ethos that welcomes their honest feedback. Conduct exit interviews with employees who are leaving. A well-planned and cordial exit interview is an opportunity to understand fault lines in your organisation’s HR policies.

The bottom line: Competitive pay scales do matter when it comes to retaining talented employees. The pandemic, however, has shown us that money alone is not enough. Empathy, appreciation, skill upgrading, and a focus on employees’ holistic well-being are equally crucial factors that will keep them from walking away.

At Careernet, we offer compensation advisory services for our clients by applying our thorough understanding of market dynamics. For more information, mail us at sales@careernet.in

Sources:

Forbes.com : Employees that Stay in Companies Longer than 2 Years Get Paid 50 Less

Forbes.com : New Study Shows that More Money Buys More Happiness

Proceedings of the National Academy of Sciences : ​​Experienced well-being rises with income, even above $75,000 per year

Harvard Business Review.org : Who is Driving the Great Resignation?

New Indian Express.com : The Great Attrition

Helioshr.com: What are Compensation Benchmarking Best Practices?

Peoplekeep.com - Blog: Employee Retention: The Real Cost of Losing an Employee

Forbesindia.com : The Great Resignation Wave: How India’s HR Can Weather the Storm