A base salary only encourages an employee to work at the level that is required of them. Reward systems can improve employee job satisfaction and retain staff.
Employee retention refers to the ability of an organization to maintain its employees. In most instances, employee retention can be represented by a simple statistic. For example, a rate of 70 percent indicates that an organization kept 70 percent of its employees at a given period of time. What many people do not stop and consider is that employee turnover costs businesses time and money, and may even disrupt the flow of an already effective workforce. When an employee says goodbye there can be a significant knowledge gap left, creating more work as remaining team members try pick up the pieces.
Many professionals with an MA in Human Resources will tell you that on its own, a base salary will only encourage an employee to work at the level that is required of them for them to keep their job. If employers want to encourage their employees to perform at a high level and stay with the organization for longer, they may consider offering their employees the opportunity to earn additional pay, perks and recognition.
Monetary types of compensation include rewards such as overtime pay, bonuses, profit sharing, recognition rewards and sales commission. For the financially-driven employee, ways to bolster their take-home pay can be a strong incentive. This is can be a particularly strong option for roles like salespeople, account managers and other positions whose performance can directly improve company revenue. In this way, the bonuses can often pay for themselves.
In addition to straight compensation, there are also benefits to consider. An attractive health benefit package, for instance, can be offered. Health benefits can be vital part of retaining an impressive employee. Such a benefit allows employees to choose the plan that works best for their family's needs, via an insurance company or a public or private health exchange. Other benefits such as stock options, a company-paid car, company-subsidized housing and other non-monetary, but taxable, income items can also be included in these retention packages. Oftentimes the value of such benefits to the employee can exceed the out-of-pocket cost to the employer and be cost-effective way to reward staff.
In addition to pay and perks, however, it's important to acknowledge that many employees are driven by recognition and a sense of being appreciated. The sense that they are both valuable and recognized for that value can be a strong motivating factor for staff. An employee may be content with a salary lower than a competitor is offering if they feel they are appreciated as a team leader, difference-maker or standout in their role. Employees who are consistently performing well should be recognized and congratulated in front of staff, as well as management. Rewards like special projects, training, event participation and the like can underscore that a company holds an employee in high esteem.
It is not always easy to find a solution to the challenge of motivating employees and encouraging them to stay with the company. In order to retain employees, businesses must consider the different ways they can reward employees and recognize that individuals may respond to different motivators:
- Financial compensation
- Good working conditions and relationships
- Professional recognition