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An employee does a job not just for money but also for passion, work culture, self-esteem, and many more. So, judging an employee only for money is a right thing for sure. The importance of compensation in employee retention depends on the type of job and industry.
A stock broker is often more concerned about compensation than most people who go into nonprofit and health care fields primarily to help people. Compensation includes not only salary, but also benefits and other perks. A recent study shows that 100% of employers in the USA, 87% in Western Europe, and 78% in Asia Pacific expect to increase salaries in 2022. As per a current World Economic Forum estimates that only 50% of employers in the Middle East and Africa will raise salaries in 2022.
Compensation & Benefits:
Compensation and benefits are the salary and other monetary and non-monetary benefits passed on by a firm to its employees in return for their services. It is an important part of HRM. The fact that it helps to keep the workforce motivated is the most important hygiene factor.
Higher compensation and benefits are directly proportional to employees’ loyalty and motivation. Companies that offer lower salaries see a high attrition rate and less productivity from their employees. All these factors help in making compensation and benefits an important factor in managing the workforce.
How salaries affecting employee retention?
There are several reasons why an employee decides to leave an organisation. For example, better training opportunities, remote job options, work culture, etc. Salaries and benefits remain the number one reason workers change jobs. So, for companies, it is vital to check these factors from time to time.
Experience and educational background are some of the important factors when considering salary for a candidate. There are around 54% of companies citing a talent shortage. There is definitely a high demand for talent. This demand is even higher for skilled labour since the worldwide skills gap affected employers’ hiring abilities long before the pandemic hit. Workers’ expectations are so high that employees are willing to change jobs to obtain the pay and benefits they feel they deserve.
In short, it’s very essential to invest in developing a competitive compensation package for today’s companies. Otherwise, many companies are going to lose top talents.
The difference between compensation and benefits:
Compensation is completely related to the money which is being paid to an employee, i.e., salary. bonuses, etc. On the other hand, benefits are the non-monetary incentives given to employees, like health benefits, for which the employee doesn’t have to pay.
To create a compensation package that drives higher employee retention rates, it’s important to include both competitive wages and meaningful employee benefits. Higher salaries without corresponding benefits that improve the life of your employees may not be enough to keep your workers from changing jobs. On the other hand, benefits without competitive salaries won’t be enough either. It’s only when competitive wages and meaningful benefits go hand-in-hand that your company can obtain the improved retention rate it desires.