Admit, the same thought crosses your mind every time an employee tenders his resignation, and gives you their reasons for leaving. It could be a better offer, wanting to pursue something they love or taking more time to take care of their families, but deep inside you wonder if simply paying them more would make them change their minds.
The truth is, employee remuneration is a key part of recruiting and retaining staff. However, not enough thought is put to using remuneration as a means to encourage increased employee performance.
A study by the Ron Volper Group in 2011, found that 80% of employees who voluntarily left their company took a higher paying position somewhere else. With the number one reason for turnover being employees not being satisfied with their compensation.
So how can you use compensation to retain and motivate your valuable employees in today’s challenging economic times?
Pay employees salary and incentives.
Companies with the highest employee morale and performance tend to pay their staff a mix of salary and incentives. These incentives can be in several forms, but what is important is that employees are given a real, tangible reason to increase their performance and be successful. Quarterly incentive payments are best, as they give employees the sense of immediacy which is more motivating than an annual bonus.
Keep the incentives simple.
Employees should easily understand what it takes to achieve the metrics needed to gain their performance incentives. There is little use for incentives if achieving them seems difficult.
Determine what your competitors are paying.
Finding out what your competitors are paying gives you a good baseline in which to set your employee compensation plan. It is as simple as paying more for the same tasks. This should be done every 2-3 years to keep your company’s compensation plan competitive.
Modify compensation based on location.
As a rule, it is a good idea to pay employees located in more expensive city centres a high salary and incentives. This is because the cost of living in a city is much higher than that of a smaller town, causing city-based employees to need a little more motivation to perform better.
Provide non-financial rewards.
Besides performance based pay, motivation can be had in the form of annual trips, increased medical coverage based and other non-financial bonuses. These also help in building camaraderie and team chemistry as people as it keeps employees striving towards a common goal which is mutually fun and beneficial.
Keep in mind that resorting to a bonus scheme to address employee turnover might not be the best long term solution.
Overheads need to be monitored, and employee KPIs need to be carefully set to avoid the company overpaying on bonuses because of KPIs which are set too low. There are several types of company bonus schemes that may be beneficial to you.
Perhaps, consider a profit-sharing bonus. This is a fairy straight-forward scheme which is easy to formulate and rewards everyone equally. This is good for team building and employee cohesiveness, however top performers may feel shortchanged as even their lowest performing colleagues share in the spoils.
Another option is the classic individualised bonus. With this scheme, rewards are gained for meeting targets individually or sometimes in a small team. This form of bonus helps spur the company’s bottom line as the company only pays out if targets are met, thereby increasing company revenue in the process, covering the cost of the bonus.
Finally, depending on the size of your company, another popular bonus scheme are shares. This means the company pays high performing employees shares in the company rather than cash. This has the benefit of giving the employees a reason to stay with the company as their shares may increase in value overtime, a direct result of their hard work.
Besides compensation, another key element in retaining staff would be to employ a partner who has expert knowledge in the field.
Here at Accendo, we have more than 20 years of industry knowledge to help you do make sure you get the right, most talented and skilled hires and then keep them for the long haul. We believe in People, Performance and Work and have the technology and tools to not only attract the right kind of candidates but train, inspire and retain them too, helping your company be seen as a top employer and a destination for the best talent.