The economy has been under a structural transformation since the late 1960s with a shift from a manufacturing economy to a service economy. This shift means that the people in the workforce compete on the basis of knowledge and expertise compared to labor efficiency.
In this regard, the workforce has become increasingly competitive with job seekers seeking to equip themselves with skill, experience, and knowledge. This also means that they are in a better position to select and switch companies based on the benefits they are getting from the employers.
Companies are not only competing for market share, but also on the basis of talent as a well-rounded workforce is the key to gaining an edge when competing for market share.
In 2022, the workforce transformation has expedited even more and so has the turnover rate. Job seekers are looking to work for companies that are offering them a well-rounded compensation plan even if it means switching jobs frequently.
What is Talent Retention?
Talent management is a buzzword in the industry nowadays. It encompasses two major concepts, recruitment and retention.
When it comes to recruitment, companies offer a compensation package that is sufficient to acquire talent. It is also critical that the HR considers a person-organization fit to assure that the person adds value to the company. The new hire also needs to be trained to make sure they gel in with the organizational culture and the company can make the most of their skills and talents.
Despite the complexity of talent retention, it is the second toughest challenge that HR professionals face. The toughest challenge for HR when it comes to talent management is talent retention and 47% HR professionals agree with it.
The sole reason for this is that compensation and company culture may be some of the aspects that attract an employee, but retaining those means offering more benefits than what they may be getting from the competitor.
So, retaining employees means engaging them, investing in their growth, offering rewards and recognition, and offering unmatched compensation.
7 Compensation Strategies for Talent Retention
In 2022 employers have gotten more innovative when it comes to devising a compensation plan to retain talent. While it is impossible to go back to the time when employees used to work for a single company for their entire careers, it is still possible to increase the tenure of the workers in the organization, especially the top talent that adds great value to the organization.
According to the US Bureau of Labor Statistics, workers in management and professional occupations had the highest median tenure of 4.9 years. However, this tenure is a meager 1.9 years in the service sector. Also, younger workers from ages 25-34 years have a median tenure of 2.8 years.
To increase this median tenure and increase the employee tenacity more than the competitors, there is a need to strategize and implement effective strategies. Here are 7 compensation strategies to retain talent in 2022:
1. Competitive Compensation
The basic and most important tactic for retaining talent is offering them compensation that is competitive.
One of the most common talent acquisition strategies is compensation combined with employer branding. Therefore, in order to reduce turnover, money, the hygiene factor, is one of the most effective compensation strategies to retain talent alongside developing an employer brand which employees would not want to part with.
2. Paying Student Loans
A relatively new compensation strategy in the market is offering to pay student loans. This is best suited when the company is hiring fresh graduates.
Since an estimated 44.7million people have a student loan in the US alone (Source), paying student loans will come forward as one of the most sought after compensation offerings. If the company is offering student loan repayment, it will also add to the employer’s branding.
3. Setting up Mentorship Programs
A mentorship program is a part of the compensation plan because it assures that the employees’ professional goals are aligned with the goals of the organization.
When the organization focuses on the learning and growth of the employee and offers a good career trajectory, it is bound to increase the median employee tenure, therefore increasing the lifetime value gathered from the investment in the employee.
4. Offering Schedule Flexibility
It’s 2022 and we have already progressed the expected technology adoption curve quicker because of the pandemic. Therefore, both employers and employees are comfortable with remote working more than ever.
So, offering schedule flexibility and a mix of remote and on-site working is the norm in the industry, especially the management and service sector. This is a crucial part of the compensation strategy for retaining talent.
5. Investing in Mental Health
Mental health awareness has expedited during the past few years and even more so during the pandemic. Therefore, companies that offer mental health and wellness insurance and coverage are sought after by job seekers.
Mental health investment does not only mean coverage of therapists and psychiatrists, but also offering wellness retreats for employees which are now becoming an essential part of employee compensation plans across different industries.
6. Incentives and Rewards
Rewards and recognition are a critical part of employee engagement. An engaged employee is bound to have a longer tenure in the company compared to an unengaged employee.
Incentivizing and rewarding employees for their work is a great strategy to get them to work harder, therefore increasing the value addition of the employee and enhancing the employer image. Both of these in turn act together to increase the median tenure of the employees in the company and thus increase the employee lifetime value.
7. Advocate a Work-Life Balance
Nothing good comes out of a burned out employee. A great number of HR professionals agree that burnout is the cause of almost 50% of the turnover in organizations. Therefore, a compensation plan that includes adequate work-life balance as well and not just monetary rewards and compensation.
Companies that offer a work-life balance along with other factors are bound to retain talent in 2022 when there is a great deal of buzz about 4-day work-week and increased flexibility.
Summing it Up
Talent retention is one of the most critical concepts to reduce expenses and increase employee lifetime value. At a time when the median tenure of employees has decreased, it is important that companies invest in a compensation strategy that retains employees for a tenure greater than the competitors.
This article discusses 7 compensation strategies for talent retention which includes both monetary and non-monetary compensation elements. Paying student loans is one of the hottest trends in HR along with a work-life balance and flexibility options. Other than that, activities that add to the employer brand make or break talent retention when the companies are offering similar compensation plans. Therefore, it is important to assure that the compensation plan is at least industry competitive if not more than what is being offered by the competitor.
