Is pay raise the right way to retain talent?

These are certainly turbulent times. With the pandemic wreaking havoc on one side and other vagaries surfacing, it is indeed a time for reflecting and meditating. Especially where your career growth is concerned. For many the answer has been to look out for another job or work, apart from what they had been already doing. Many others are still searching.
But what this reflecting and thinking has done is created a problem of sorts for businesses, which were used to running things in a certain way. With people moving away, the equilibrium has been shifted. According to data from the Society for Human Resource Management, business leaders are making efforts to address the so-called Great Resignation plaguing firms by providing recruits and existing employees more compensation and more competitive perks.
Employees are switching and quitting jobs around the globe, making employee retention a challenge. Those who chose to stay said they had to take on more work due to their former coworkers ‘ departures, and 55% of them are unsure about their pay. As employees leave their current positions, organisations are offering them a higher pay packet to retain them. And in turn what is happening is that the existing employees aren’t satisfied with their current remuneration and are asking for more.

Employees take

Where employees are concerned, many of them say that they have had a time to ponder over things after and during the pandemic and decided that with life so unpredictable they might like to work where they are more happy, satisfied and feel accomplished, despite the pay packets.
They cite several reasons, like lack of personal growth, no recognition, inadequate pay, of which they say they were unable to think of earlier but with the pandemic giving them a breather, they have been trying to sort out their priorities.
Majority of workers have begun to hunt for more meaningful careers with robust growth opportunities. Many people have begun to re-evaluate their life’s purpose, and many have chosen to leave their prior occupations, and take control of their careers. All in all, maybe all the workers are quitting their jobs in quest of better pay and better benefits.

Employers’ dilemma

Struck down with a scenario that they hadn’t envisaged, the company’s primary response is to offer a higher paycheck to most employees to hold it off. In recent times, a lot of big names in the corporate world have announced substantial rise in the pay of their employees. Many other companies are following suit. Maybe the companies are offering higher paychecks to hold on to staff whose decision to continue still hangs in the balance. Understandably, the numbers of suitable candidates are less and the competition high. As a result, recruiters are left with a very difficult choice of hiring new talents or retaining existing strong candidates.
Also, acquiring a top-level employee is costly, and increases the annual turnover, the HR is finding it a difficult road ahead. Finding a suitable candidate for a top executive might cost up to 213% of their original pay. Naturally, employers go with the latter choice of retaining their existing employees and making counteroffers with a higher pay scale.
Counteroffers are much more typical in candidate-driven industries like construction and IT, where a skills scarcity makes finding and hiring a new employee extremely challenging. The epidemic has triggered the economy significantly and changed the way of work, and adaptability is a deciding factor in many organisations. If employers are unable to meet the needs of employees, they are most likely to take a downtown.
While the crisis may be over soon, the impact it has had on workplaces throughout the world might take years to recover.

Is pay raise the way to retain talent?

Talent is the most valuable asset of a company, and attempts of all kinds are being made to retrain employees.
Most companies strive to make enticing retention offers to people who have resigned but need to be on board for the sake of the company. Vital employees are offered a pay raise, specific benefits, and in some cases, a promotion to retain them.
The choice of increasing the pay of an important employee benefits the organisation too. Organisations are not only able to retain experienced employees but also save time and money that would otherwise go into recruiting and training. The expense and effort needed in finding and training a suitable candidate in a competitive market are considerably higher than a pay raise.

But what’s the catch?

Although a pay raise may seem like a win-win situation for all, there are some drawbacks to it. Employees who have decided to change professions from the beginning won’t be retained even with a raise. Offering them a raise or extra benefits is just a temporary solution.
Employees are looking for new professional opportunities or a more suitable work environment. Though some people switch occupations only to receive a higher income, other things must come first. Often, it is a deep-seated issue such as a lack of job progression, a desire for a new challenge, or, increasingly, a need for a better work/life balance. A larger paycheck can never solve any of these problems.

Do these counter-offer strategies work…

The success rate of these counter-offers is as low as possible. These have become nothing but a temporary fix to a dire situation where neither the company nor the employees are in a position to lose any of it. Accepting a counteroffer is likely to harm your existing employer’s relationship with you. After all, the person who had just filed his or her resignation is now staying because a better paycheck or a promotion has been provided. This may lead them to mistrust the candidate’s loyalty and if he or she will depart if a better offer comes along.

After accepting a job offer, the employer’s attitude toward the employee may alter. In such circumstances, a sense of negativity tends to prevail around the employee.
Furthermore, after accepting a counter-offer that includes better pay or a promotion, an employee’s usual route of advancement in the organisation may get further delayed.

Accepting a counteroffer by an employee might have consequences for the entire company. When word gets out that a coworker received a raise, other employees may be inspired to ask for a raise as well. This might lead to more counteroffer negotiations and compensation increases than anticipated, resulting in a higher cost and an imbalance in salary scales.

Hence, it is very obvious that even a pay raise is not that enticing when one has made the decision to move on. But the employers are doing what best they can to retain their talent as well. A lot is at stake, an employee’s personal and professional development and the employer’s bid to save its talented workforce and do whatever they can to stop them from moving away.

A raise may be profitable, but might also have negative impacts. A clear conversation between two parties is the best as expectations are clearer and saves time and money.

Source: GWFM News

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