The Great Resignation is affecting almost every single company, which is causing a decrease in productivity and an increase in employee stress.
This can also cause quite a downward spiral if leadership does not step in and make positive changes for the loyal employees still on the floor.
The trend tends to go like this:
- Employee A leaves the team for a better job opportunity and increased compensation
- Team A takes on the work and stress of Employee A
- Team A’s manager works to fill Employee A’s position but since the employment market is employee-driven and more expensive, finding a good fit takes a long time
- Team A becomes stressed with the additional work
- Employee B leaves Team A for a new opportunity and less stress
- Team A becomes even more frustrated and stressed
- A replacement for Employee A is finally found – but due to the market, the new Employee A is paid at a much higher rate.
- During casual conversation, some employees on Team A learn about the new higher salary for Employee A
- Now disgruntled and feeling taken advantage of, Employees C, D and E all leave the team
- Now Team A and fellow teams are not able to produce like they were before – Teams B and C try and help, but similar situations are happening on those teams as well.
- Production and profits fall, and customers are upset and look to your competitors
- Because of the profits falling, there is a hiring and promotion freeze
- More employees become disgruntled and leave, continuing the downward spiral
While there is a number of factors that lead to an individual seeking new employment, currently the number one reason is compensation.
Many employees understood that there was a lot of uncertainty for the business during the pandemic. They were willing to go with reduced, or even without raises and bonuses for the better of the entire company. According to the business, it helped save jobs of fellow teammates and helped the business not go under. But it’s now been almost two years. And even though that uncertainty still looms overhead, employees have experienced surges in prices for rent and everyday goods. They have also watched how the business was operated.
If sales increased and profits grew, employees are looking for their “reward”. While their choice to remain was empathetic, it was not selfless, and employees would like to be rewarded for their loyalty.
If sales decreased and profits fell, employees are trying to save themselves and leave a business that may not have a strong future.
Why Employees Leave for Better Compensation
Unfortunately, employees have learned over the years that the one way to significantly increase their wages is to quit and accept a position with a new employer.
Employees are told that “The best way for an employee to get ahead is to actually quit their job and go to another company for compensation reasons,” Brian Kropp, vice president at research firm Gartner tells CNBC Make It.
“Companies are willing to pay about 15% more for new employees, but they’re only willing to give their current employees about a 2% or 3% annual raise,” he explains, citing Gartner’s research. “So, to get ahead financially, what a lot of employees have realized is that in today’s tight labor market, the best thing to do is to go to another company to get more money rather than trying to get more money by staying at your current company.”
When employers continuously pay more for new employees rather than rewarding existing employees, employees get the message quickly. And with a current inflation rate at over five percent in the US, employers should find ways to not only help employees keep up with the current market, but also show them that they are valuable and appreciated.
Re-Recruit Your Staff
One way to help overcome a company’s previous stigma for paying more for new talent, is to re-recruit current staff members.
- Create a job analysis with employees to show off their responsibilities and duties
- Focus on the positive instead of the negative
- Have HR complete an external salary review of the position and its responsibilities
- Offer employees their current job (or a new title if that is revealed) at the new market rate
This method can help employees understand that you have gone to bat for them to make sure they are paid market value for their skills. They will feel more appreciated and valued for everything they’ve done.
That Sounds Expensive
Paying employees more will affect your salary budget. That is true.
However, continuing to pay more for new employees rather than promote and give raises to existing employees is likely costing more in the long run.
Hundreds of studies show that it costs two to three times of the current employee’s salary to find, recruit, hire and train their replacement. And in the current market, it can be four to five times more expensive to fill a position.
Let’s look at the numbers:
With an average annual salary of $51,000, an average new-employee salary increase of 15% and average replacement costs of three times the salary, each “average” employee that leaves will cost the company $160,000. Now multiply that by 50, 100 or even 1,000 employees, and those costs quickly become monumental.
If the statisticians are accurate and companies experience a 26% to 40% turnover in their workforce this year, salary costs will rise considerably anyway in this employee-driven market. Wouldn’t it make more sense to retain your current talent and reward your best employees, encouraging them to continue to grow, improve and help the company succeed?
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