New Survey Says Compensation Is The Top Reason For Employee Turnover

Salary.com’s annual Employee Satisfaction and Retention survey reminds employers to address how they manage employee performance and understand reasons why employees switch jobs. According to the survey, the most common reasons employees leave their current job are: • inadequate compensation, • lack of career advancement, • insufficient recognition, boredom, • inadequate opportunity for professional development. “Compensation is the number one reason for job turnover because employees want to be paid what they are worth. There needs to be a clear understanding between employers and employees on what it takes to get to the next level and then employees will be more satisfied,” says Maura Pallera, global research analyst at Salary.com. While employees were 57% likely to look for another job within the next three months, including updating their resumes, surfing online job postings, posting or e-mailing their resumes, and networking with colleagues and friends, 38% of employees surveyed said they would need a 16-30 percent increase in pay to leave their current jobs. “In general it’s cost effective to keep an employee on board. The cost of hiring, training, plus relocation costs can add up for employers,” says Pallera. According to the most recent statistics from the Bureau of Labor Statistics the turnover rate in the professional and business services industry which includes the information technology field is 4.7%. “For the third year in a row, survey statistics reveal that companies are most likely to lose employees who have been in their current job for 3 to 10 years. Since this is considered to be a point in an employees’ tenure when they are most productive, this can represent a significant cost to employers.” 62% of employee respondents in their current position 1-3 years were interested in looking for a new job, 63% of those in their jobs 3-5 years, and 59% of those with 5-10 years in their current position were interested in looking for a new job. What does losing an employee mean for employers? Leaving a job often leads to a higher cost for the employer. According to the survey, this year employers estimate the average cost to replace a typical employee due to turnover will be $21,000, which was up 40% from last year’s results. Employers in the biotechnology field also estimated the cost to replace an employee due to turnover as a percentage of the replaced employee’s salary to be 38% of a $46,250 salary. “People in the biotechnology industry are more in demand and at higher leveled positions. Often times it costs about 50% in salary to find someone to fill the position. The time people stay and the volume of people leaving drives up the cost and leads to higher turnover,” says Pallera. Pallera thinks that the cost of turnover can be reduced if employers interact and give more feedback to their employees. “Employers can reduce the cost of turnover by being aware of their employee’s satisfaction. There needs to be discussion and mutual understanding of what you need and what has to be done to get to the next level and so you can be fully sufficient. Employees need to be engaged and there needs to be open communication to develop an employee. If there’s no training, and no movement, that leads to a high turnover,” says Pallera. Employers underestimate the possibility of their employees switching jobs. According to the survey, while employers acknowledge the cost of replacing employees due to turnover, on average, they will offer a 7% increase to an employee to stay in their current job. “Employees want salary increases but with the economic situation and the possibility of being laid off, less than 1/3 of those surveyed said they needed a 7-15% increase in annual pay. They are tentative to move because of job security. And the survey shows that even if they are unhappy, ½ of them stay in the job,” said Pallera. Pallera cites the state of the economy and job security as reasons why employers are more likely to believe that their employees won’t switch jobs. “The time and effort it takes the employee to update their resume and actually interview and apply for positions takes time. There could be a false sense of security, but the employee should never be underestimated,” says Pallera. The survey also stated that employees are more likely to stay in their current position based on “good relationships with co-workers, good relationships with managers, desirable working hours, attractive compensation and attractive benefits were the most common responses given by employee respondents.” Pallera advises employers to look at who’s in the workforce and compare it with their budget. “Employers want the best in their employees. Often times there might be a lower salary but more benefits given. You have to look at overall compensation, including flex time and life balance issues. Women especially are often times willing to take less pay in return for managers who offer flexible schedules.” The bottom line is to figure out what’s best for you. Should you decide to be apart of the 4.7% of employee turnover, make sure you are being fairly compensated for your skills and time in your new position. If you decide to stay in your current position initiate conversations with your employer about your job performance and compensation. The more mutual understanding between you and your employer the more satisfied you will be with your job.