A Glassdoor study found that it takes on average $4,000 and 24 days to hire a new employee. How do you retain good talent in an age of increased resignations brought on by high burnout and waning loyalty? Performance and merit-based rewards can be hugely effective tools to recognize strong performers and motivate increased productivity and loyalty.
The last two years have been inundated with an overwhelming number of resignations. Deemed the Great Resignation, millions of employees departed from their jobs starting in 2021 and lasting into 2022. Coupled with the pandemic, employees began to reassess their relationship with their job and search their souls to evaluate what they want in life. As a result, retaining skilled employees has been enormously challenging. Performance-based compensation for talented employees (that would be hard to replace) is a great way to attract them to stay with the company. Monster states “Scrimping on wages usually brings with it a number of hidden costs, including higher absenteeism, excessive turnover, and customer issues. Besides, how can you attract top performers with lower-than-average pay?”. Remember this as you consider giving your employee a raise or not. If you are conservative on your employee’s salary, they may feel undervalued and underpaid and rethink their position.
Respond to Market Conditions / Soaring Inflation
Inflation is at a record level in 2022 and consumers are being hit with higher price tags for nearly everything - food, gas, utilities, etc. The Bureau of Labor Statistics notes that the Consumer Price Index for All Urban Consumers (CPI-U) over the last 12 months has increased 9.1 percent for the all items index (before seasonal adjustment). Given the rising inflation in 2022, your employee’s paycheck is unquestionably covering less and leaving them little room for savings. Offering a raise during this hard economic period will enable your employees to keep up with the cost of living and reinforce your commitment to them. As you determine what the appropriate raise would be, use the Council for Community and Economic Research’s (C2ER) Cost of Living Index Tool to compare the cost of living between specific cities. MERIC released an easily accessible table based on C2ER’s data that compares the cost of living across states depending on the different types of goods.
Recognize Good Performance
Acknowledging your staff member’s strong performance and “wins” is imperative to drive employee engagement and maintain high performance. Gallup research found that “Workplace recognition motivates, provides a sense of accomplishment, and makes employees feel valued for their work. Recognition not only boosts individual employee engagement but also increases productivity and loyalty to the company, leading to higher retention”. If your employee is consistently a high performer and delivers, it may be time to give them a raise. Ultimately, recognizing their performance with financial rewards will motivate them to continue to work hard.
Use as a Motivation Tool – Inspire to Go Above and Beyond
Do you have an effective motivation tool in place? Having a structured raise procedure will motivate your employees to work efficiently, take initiative, and commit to the organization. According to Chron, “Raises can be an effective motivator for employees; however, employees must recognize that raises represent a reward for excellent work. There must be a direct connection between superior performance and higher pay”. If your employee routinely puts in the hard work, you should reward them. Leveraging a standardized raise procedure will simplify the process for you while simultaneously galvanizing your employees to reach even higher levels of performance.
Acknowledge Loyalty and Their Value
Showing appreciation for your loyal employees who are genuinely committed to the company is essential as they can have a significant impact on productivity and growth. Forbes notes “recognition shows employees that they’re valued and they aren’t invisible”. You may be thinking ‘I do appreciate my employees!' and though this may be true, consider if you do so on a regular basis. Glassdoor's Employee Appreciation Survey found that “68% of employees report that their boss shows them enough appreciation, however, more than half (53%) of employees admit they would stay longer at their company if they felt more appreciation from their boss”. Showing recognition to your loyal employees by extending a raise will demonstrate the mutual commitment that benefits both your organization and the employee.
Despite the pandemic, areas of the labor market are bouncing back. U.S. Unemployment has fallen to 3.5% in August 2022 though not all sectors are responding as quickly as others. If your industry is still facing labor shortages, you may want to consider offering raises to retain your valuable employees. Additionally, if they work in a skilled occupation like architecture, engineering, or legal, it is advantageous to offer fair compensation and award additional compensation to avoid potential poaching from competing companies.
Elevate Company Culture
Burnout has steadily been increasing throughout the pandemic. The American Psychological Association mentions, “from longer work hours to increased demands at home, the COVID-19 pandemic introduced new stressors to nearly every domain of life. As the world heads into the 3rd year of the pandemic, these stressors have become persistent and indefinite, heightening everyone’s risk of burnout”. It’s not uncommon to regularly hear of coworkers feeling exhausted and extended beyond their limit. Unfortunately, many companies are eliminating the heightened focus on mental health that was present during the peak of the pandemic. Having a positive work culture that reinforces well-being is important for both employees and organizations alike, generally leading to a more productive and sustainable workforce. There are many ways to promote a positive culture including showing empathy, being accessible, and fostering a safe environment that encourages openness. In addition, compensation can be a great way to boost your employees’ morale and reinvigorate their passion for work.