Pay Raises Aren’t the Only Way to Boost Retention

A new study finds that companies continue to explore non-monetary ways to reward employees.
By: | February 19, 2019 • 3 min read

The labor market is tighter than a drum and, despite some recent economic headwinds, shows no signs of letting up. Employers, desperate to hold onto valuable talent, should finally be preparing to raise salaries to ensure their people don’t depart for greener pastures elsewhere. However, they’re not. What gives?

PayScale’s 2019 Compensation Best Practices Report, based on input from 7,000 employers, finds that nearly 70 percent plan to give out pay raises of only 3 percent or less. That low number doesn’t actually mean companies aren’t concerned about attrition, says PayScale Vice President Lydia Frank.

“Retention is not only a big area of concern for most organizations, it’s a growing concern,” she says. “Nearly half the companies we surveyed said the strong job market is increasing their turnover rate.”

In fact, more organizations (66 percent) cited employee retention as a major concern this year than they did in PayScale’s 2018 survey (59 percent). Yet companies are electing to offer incentives other than large pay increases, mindful of past recessions and perhaps heeding warnings that another may be looming—in fact, this year’s survey finds that 21 percent of companies are engaging in some form of “recession planning,” says Frank.

The hot alternatives to base pay raises this year are boosts to investments in learning and development programs (59 percent of employers), opportunities for remote work/work-from-home (44 percent), paid family leave (one-third of this year’s respondents), and unlimited paid time off (9 percent of companies offered it last year, compared to just 5 percent in 2016, the survey finds.

“Organizations are leaning into ‘How else can we pad the deal, beyond just cash compensation?’ ” says Frank.

That’s not to say companies are foregoing cash as a motivator. Indeed, 40 percent said they plan to give base pay increases of 10 percent or more for certain jobs within the organization, typically for hard-to-fill positions in areas such as IT.

For their overall strategy, however, many respondents to this year’s PayScale survey are beginning to focus on their “pay brand,” says Frank.

“‘Pay brand’ is similar to employer brand, only it’s around how your values show up in the way you pay people,” she says.

This is reflected in the employee-led pushback against companies such as Google, where some employees staged a brief walkout after reports that the company paid $90 million to former executive Andy Rubin after he resigned in the wake of sexual harassment claims against him that Google’s leadership had deemed credible. Amazon also came under fire for eliminating bonuses for certain workers after announcing it would raise its base pay for all employees to at least $15 per hour. The latest company to find itself in the hot seat is food-services giant Aramark, which attracted attention after canceling its annual bonuses for many mid- and lower-level managers.

“Only 21 percent of employees feel that they’re fairly paid,” says Frank. “This is an uphill battle.”

Organizations with a strong pay brand tend to spend more time ensuring that employees understand the rationale behind pay decisions, she says. If, for example, an employee feels she isn’t being paid in accordance with her job performance or experience, HR should be able to explain to her the company’s process for determining pay and steps she may be able to take (without leaving the company, of course) that would raise her pay, says Frank.

A small but growing number of companies are also embracing pay transparency as a way of ensuring employees feel they’re paid fairly, she says.

“We found that about 36 percent share pay ranges with employees for their positions,” she says.

Sharing the context around pay decisions can be very helpful, says Frank. “It’s easier to retain employees if they have some understanding of why they’re paid what they are and how they can move up in that pay range.”

Andrew R. McIlvaine is senior editor for talent acquisition at Human Resource Executive. He oversees coverage of talent acquisition and recruiting and also edits the weekly Recruiting Trends Bulletin e-newsletter and its associated website, RecruitingTrends.com. A Penn State graduate, Andy also spent two years in the U.S. Army prior to attending college and attained the rank of sergeant while serving in the Army Reserves. He can be reached at [email protected]