Employee retention strategies take divergent paths on salaries, benefits

There are many strategies that businesses use to retain high-quality employees. Some of these include good benefit packages, flexible scheduling, congenial work environments and family-friendly policies, but a key strategy is where a business sets its pay level. There are three choices: you can lead, match or lag behind your competition.

Those businesses that lead their competition in setting pay levels theorize that they are more likely to keep their employees because they have minimized the threat of dissatisfaction with pay. They also hope that higher pay levels can attract the best employees away from their competition. Although some businesses choose this strategy, most businesses tend to match their competition in setting pay, thinking that they can enhance employee retention with better benefits, flexibility and some of the family-friendly strategies previously mentioned.

Some businesses choose to lag behind their competition in pay. If a business requires many employees who can be trained quickly without a lot of expense, and the labor pool is large, this might be an appropriate strategy. The business with a pay level that lags the market might offer other benefits that employees perceive to offset lower pay. Job security might be one of those benefits because the freedom from fear of layoffs can be important to some employees. Not-for-profit businesses might offer the opportunity to work in a setting that matches with employee values or offers them a greater sense of meaning in their work lives
A recent poll by the Society of Human Resource Management (SHRM) suggests that up to 75 percent of employees will be looking to change jobs by the end of the year. According to a recent article about human resources issues, this is an increase from the normal 30 to 40 percent of the workforce that is looking to change at any one time. In addition, as the baby boomer generation begins to retire, the number of employees who can replace these retirees will be much smaller.

The pay level strategy your business has used before might no longer be appropriate as you consider the changing labor market. Re-examining your pay strategy in light of current conditions might help you keep the employees you don’t want to lose. v

Pam Franta is the owner of Pamela Franta Consulting. She is a licensed psychologist, specializing in executive coaching/consulting with individuals and groups at work. She can be reached at [email protected].