Salary bench-marking & how it relates to development, retention & exit of employees
How can you retain the best talent by paying the best base salaries within your industry sector? Do you even need to?
Your Marketing Director or Chief Financial Officer has been in role for over five years, nurtured internally and gladly receiving the annual 1-3% salary increases to base salary as a well-respected employee who has been hitting all their required objectives and targets. Although they are not unhappy, a headhunter approaches them about a new role, their dream job! The role is a slight step up in overall remit, but nothing they can’t do, they equally can bring a lot to the role beyond the key requirements through various projects they have successfully completed working for you in the past few years.
Although they are not chasing money necessarily they are astonished to find out their current salary is far below the industry average for their level and amount of experience. Most people would feel put out of joint, I certainly would.
Why do people leave their company? Beyond salary being a key factor, it usually boils down to engagement, the strength of the leadership team, limited growth prospects, or work-life balance. Salary usually is top of the pile for many and will most certainly be within the top three criteria. If you as an employer can afford to replace your employees at the same level and usually pay more for doing so (as well as needing to onboard them and usually seeing other colleagues struggling with increased workloads in the short term too) then why would you not reward current team members for doing a great job? You will probably see more loyalty when they get approached for a new job externally and equally their productivity is likely to increase.
The war for talent term coined by McKinsey’s Steven Hankin in 1997 is still very much in use and relevant today. There is still an increasingly competitive landscape for recruiting and retaining talent in many industry sectors and money does still talk.