• Book Your Free Demo

How to Improve Employee Retention Through Pay Raises

Jan 17, 2022
How to Improve Employee Retention Through Pay Raises

As we move through the year 2022 and beyond, rates of employee turnover have increased and the need for employee retention is more important than ever before. The arrival of the COVID-19 virus changed many aspects of our lives, and in addition to changing how we interact with one another, it has had many employees thinking about what is most important in their lives. The result has been what the media dubs to be the “Great Resignation.”

For a long time now, many employees have felt that they have not been paid accordingly for their efforts at work, and for as far back as we can remember, many just dealt with it. However, the COVID pandemic has changed how many employees feel, and they are quitting their jobs because they don’t want to risk their health in an unsafe work environment while making poor wages. Right now, money talks, so your company may need to offer pay raises to retain your current staff and bring in new workers. Let’s talk about the importance of implementing employee retention strategies and how to make it happen, even if you have a smaller company.

The Great Resignation

Since the COVID-19 vaccines have made the rounds, we have seen more of a return to normalcy, especially as jobs open up across the country. However, while the outlook appears bright, we are not yet out of the woods, and many people are changing how they think about their lives and how work fits into the equation. In August alone, 4.3 million people quit their jobs. Among the reasons for the resignations were considerations about their health and the hope of career advancement or finding a job with more flexibility. 


Of course, the biggest factor is that many people want to make more money in the long term so they can provide a suitable life for their families. A lot of potential employees are holding out for that very reason, and if your company can set itself apart with higher wages, then you could be setting yourself up for success, especially if you are paying more than your direct competitor. Right now, around eight million people are looking for jobs, so you need to take this time to create a compensation plan so you can attract the best and brightest.

Why Paying More is Key

While having a higher pay rate on day one will bring in some interested employees, your company could also see many other benefits by offering a higher pay rate for your current employees. Of course, employee retention rates are key. If you are paying employees more, they won’t leave because they know that your competitor is paying less. Once your employees realize that they are getting this great benefit, they are bound to have more pride in their organization and they will refer their highly qualified friends.

In addition to wanting to stick around, your employees will also likely perform better when they are making more money. After all, they know that if they want to continue making the same great salary, they need to perform well so they are not replaced. Employees that are not paid well are often distracted at work as they worry about how they will make ends meet and pay for what they need to support their families. If you make it a point to pay your workers a fair wage, they will be less worried about home and more focused on delivering high-quality work at the office.

How to Pay More

Once you realize how pay raises could help your company to retain your top talent and improve your profits, it is time to write up the details about how much you plan to increase the pay and when. Larger businesses may be able to reach into their expense fund and easily find the money they need to increase employee pay without sacrificing their operations. However, small business owners may be scratching their heads as to where you can find the funds to pay people more in the first place.

One way to find more money is to cut down on some unnecessary expenses. For instance, do you need a cleaning service to come in every day or can you settle for a couple of times a week? You could also take a closer look at your vendors and determine if you are paying too much for what they offer and if you can find an alternative. If this is the only vendor that will suit your needs and you have been in business for a long time, you could also try to renegotiate their costs and save money that way.

If your HR team and company management are stumped on how to find more money for pay raises, it may be time to bring in an outside expert. A financial advisor or Certified Public Accountant (CPA) can be a miracle worker as they will sift through your corporate finances and determine where you can cut funds or find money while ensuring that your company will continue to run smoothly. 

Keep in mind that any strategy you use will be money well spent. The cost of finding new employees, providing onboarding processes for them, training, and creating more office space can be very costly. If you can pay more and retain the same employees now, and not need to worry about hiring later, then you could keep that leftover money and put it towards your business.

Paying Through Other Benefits Like Wellness Programs … 

Even if you try to move money around, your organization may simply not have the funds to pay your employees a regular pay raise that they will see on their paycheck. However, your HR team can look at alternative perks that you can offer today that will save the employees money in the long run, so it is just like they are getting that money directly.

For instance, many employees pay a lot for health insurance, especially if they have large families, and the cost can be so great that their paychecks are lower because of it. To aid in this regard, your company could set up a wellness program where employees are encouraged to live a healthy lifestyle, and in exchange for showing positive results, employees could save money on their monthly insurance premiums. In addition to the money you’ll save, when your company culture supports healthier workers, they will also call out less often, and productivity

… Or a Remote Workforce

Since the COVID-19 pandemic hit our shores, there has been another shift in how the world conducts business and that is the popularity of working from home. Not only will this arrangement reduce the chances of employees contracting the coronavirus and improve productivity, but it could also save the employees a bunch of money that they could use for other expenses or to save for the future. 

 

The fuel savings and reduction of wear and tear on employee vehicles due to the lack of a daily commute while working from home is a major cost-saving perk that could result in hundreds of dollars. On top of that, employees can also save money that they would spend on office attire and childcare.

Some HR departments may be hesitant about the idea of turning to a remote work environment because they believe that employees won’t be as engaged when they work alone or that they will not be able to communicate as freely as they do at the office. However, the opposite is true. The ability to work at any time and complete tasks without distractions has actually increased productivity since 2020. That means that your company could be paying your employees more and seeing a boost to your profits.

As far as the communication aspect, that is covered as well. There are many ways to meet and speak with coworkers from the comfort of your home. Zoom and other virtual meeting programs have allowed many businesses to have their regular meetings without missing a beat. There are also online whiteboards available that allow everyone on the team to contribute their ideas and mark off completed tasks in real-time. With these tools at your disposal, your company can save your employees money and work seamlessly, as if you were still in the same office. 

As the feelings of our workforce continue to evolve, as should our businesses and how we treat and attract high-quality employees. By finding ways to provide pay raises, employee retention strategies, and other perks, your organization can hire the best people and keep them for the foreseeable future.

 

Author Bio: This article is written by our marketing team at HR Cloud. HR Cloud is a leading provider of HR solutions, including recruiting, onboarding, employee engagement, and intranet software. Our aim is to help your company improve employee engagement, employee productivity, and to save you valuable time!