Salary increases won't necessarily retain workers

Tuesday 6th May 2008

According to the latest Higbee Schäffler study of New Zealand remuneration, there is no connection between employee pay and voluntary staff turnover.

The review of data from 35 major companies shows employees are not quitting their jobs because of pay issues.

The average staff turnover in the 10 highest paying companies was 17%, compared to the 10 lowest paying companies' turnover being 18%.

The 10 companies with the highest turnover (an average of 27%) overall paid almost exactly the market average. So did the 10 companies with the lowest (11%) employee turnover. The study did exclude sectors with traditionally high turnover, such as hospitality.

Higbee Schäffler senior consultant, Caroline Fenton, believes "Paying high in the market may attract candidates at the recruitment stage, but it doesn't reduce turnover."

Increasing pay not affecting staff retention should come as a relief to managers struggling to keep up with rising pay packets.

"Paying every employee above the market median is a questionable strategy and unlikely to bring the best return to shareholders or taxpayers. Companies are better off targeting their best people, with high pay going to the most productive employees," Fenton says.

Fenton also says the study shows remuneration ranks well down the list of employees' reasons for leaving a job. "People leave because of management issues, not because of pay. The most common reasons for people leaving their jobs are that they don't like the manager they're working for, or they feel they are missing out on professional or personal development."

Particularly today, employees are looking for more intangibles such as career development, job satisfaction, flexibility and a pleasant work environment.

The study also believes people may well take a salary cut to move into a job which offers more opportunity, flexibility or new challenges.

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