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Payscale Research Reveals Top Drivers Behind Employee Turnover and the Impact of Pay Transparency

October 20, 2023

Research from Payscale revealed that the health of an organization in terms of its prospects has emerged as the foremost motivator driving employees to seek new job opportunities. Payscale’s Retention Report delves into the primary reasons behind employee attrition and the influence of pay transparency. The research findings reveal intriguing insights into the dynamics of the modern workforce.

Chief People Officer at Payscale, Lexi Clarke, emphasizes the critical need for companies to address employees’ demands in order to retain their workforce. The study’s data indicates that employees are less inclined to leave their jobs now compared to the tumultuous period of the Great Resignation, but increased demands from employees necessitate strategic responses. The research identifies that employee departures are most likely to occur when a company’s long-term viability is in doubt or when employees perceive their compensation as unfair.

Interestingly, while pay transparency alone reduces the intent to quit by 30%, it has a counterintuitive effect on Generation Z employees, increasing their inclination to seek new employment by 3%. This paradox suggests that younger workers are more motivated to change jobs for higher salaries, particularly when they encounter job ads advertising higher pay ranges without understanding the reasoning behind their existing compensation. The report underscores that pay transparency should be integrated into a broader compensation strategy, which includes effective pay communications.

Payscale’s analysis underscores the pivotal role of an organization’s future outlook in retaining employees. In an environment fraught with layoffs and hiring freezes, effectively communicating improved business health can decrease the intention to resign by a significant 39%. Clear and transparent dialogue regarding the organization’s financial well-being is crucial for talent retention.

The perception of unfair pay also significantly impacts turnover. When raises fail to keep pace with inflation and more lucrative opportunities appear in online job postings, employers must go beyond merely posting pay ranges in job ads. They must also communicate how pay is determined, its competitiveness in the market, and its potential for progression. Improving the perception of fair compensation can reduce the intent to leave by 27%.

The report highlights the importance of addressing negative workplace cultures as a means of retaining employees. Employees experiencing negative or unproductive environments are more likely to seek new employment to safeguard their mental well-being. Acknowledging workplace dysfunction and actively fostering a positive company culture can reduce the likelihood of employees seeking new opportunities by 22%. Similarly, cultivating improved relationships between managers and their direct reports can decrease the inclination to seek new employment by 21%.

To establish transparent pay practices, the report suggests a comprehensive approach that includes a compensation strategy aligned with the organization’s goals, internal and external pay equity analysis, manager training, and meaningful pay communications with employees. The ultimate objective should be for every employee to understand that their pay is fair and the reasons behind its fairness, thereby demonstrating that the company values its employees, fosters a positive work culture, and has a promising future.

As the study reveals, pay transparency is becoming a standard practice for employers, with nearly 45% of them now including salary ranges in their job postings. Payscale offers a Pay Transparency Solution to assist organizations in quickly achieving their pay transparency goals, enabling them to publish pay ranges with confidence, facilitate pay communications, and conduct pay equity analysis to ensure fair compensation practices. For more information, visit Payscale.com.

The Retention Report is based on the analysis of crowdsourced data from over 578,000 U.S. workers who participated in Payscale’s online salary survey between March 2018 and March 2023. The study employed a logistic regression model to determine the impact of select variables on retention. The complete report and its methodology are accessible on Payscale.com.

Source: Payscale

By Kevin Marrs, courtesy of SBAM-approved partner, ASE.

 

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