Pay Transparency is a top driver of retention

?? Employers invest a lot in attracting talent?and most want to retain their people. Pay transparency increases retention but other variables such as a company’s future outlook (bright future), fair pay perception, workplace culture, and manager relationships have a greater impact. While bright future still has the biggest impact on retention regardless of industry type, there were differences when it comes to fair pay and pay transparency. The more transparent pay is, the less likely employees are to seek a new job by 30% across levels but to have a positive impact on retention as well, pay transparency must be combined with compensation strategy and pay communications, and ideally pay equity, according to a new interesting research published by Payscale using data from 578,141 US employees with a logistic regression model?between March 2018 and March 2023.

?Factors that impact retention

Researchers found that on average, an increase of one transparency level rating is associated with a decrease of 30% in the odds of seeking a new job. Or, conversely, a decrease in one pay transparency level is associated with a 30 percent increase in the odds of seeking a new job.

?The impact of pay transparency on retention varies by industry type and generation.

Researchers noticed that for blue-collar industries and the healthcare industry, as fair pay ratings increase, the likelihood of seeking a new job decreases by 23 percent with each level. This is the second most impactful variable on retention after bright future. However, for white-collar industries, the likelihood of seeking a new job decreases even further to 32 percent with each level.

This is likely due to salary determination being more secretive in white-collar industries (professional services, scientific and technical services) than in blue collar industries (accommodations, food services, and retail) or healthcare.

?The five common reasons that impact Turnover

?? Payscale researchers found 5 common reasons, company outlook (bright future), company culture, manager relationship, fair pay, and pay transparency using a logistic regression analysis model to determine the comparative impact of each on intent to leave.

1?? Bright future: After all, why would employees stay at an organization that is a sinking ship or where job security is shaky? In an uncertain economic climate, communicating the health of the business is extremely important for retaining talent.

2?? Fair pay : which decreases intent to leave by 27 percent with each level.

Again, this shouldn’t be surprising. Employees work in exchange for compensation. If the employee feels undervalued, they will look to take their talents elsewhere. Although fair pay perception may be more likely to impact retention at organizations that are otherwise healthy, fair pay is paramount for retaining talent across all levels of evaluation.

3?? Company culture and 4?? manager relationship were in the middle, decreasing intent to leave by 22 percent and 21 percent, respectively. Here, intent to leave is probably impacted by day-to-day interactions and whether or not the employee feels that the situation is reversible or can improve with time or effort. In an irredeemably toxic situation, employees are still likely to leave, and this could be compounded by unfair pay or a poor outlook on the future of the business.

5?? The least important variable when it comes to impacting retention is pay transparency.

?? This doesn’t mean that pay transparency doesn’t have an impact; the overall Payscale data shows that pay transparency?does?have a statistically significant impact on retention. However, pay transparency decreases intent to leave by only 1 percent at each level when compared to other variables studied.

As mentioned, pay transparency is more likely to impact retention when combined with pay communications and career pathing to help employees understand how they are valued and how to move up in the organization.

Finally researchers conclude that pay transparency is going to become an indispensable part of talent attraction. However, to have a positive impact on retention as well, pay transparency must be combined with compensation strategy and pay communications, and ideally pay equity. This is especially true for younger workers who are more anxious about their pay, less knowledgeable about how pay is determined, and more apt to seek alternative employment if they are not being proactively shown that they are valued. Also there are compensation management best practices that can support pay transparency and pay communications to help retain employees of all generations

Thank you ?? Payscale ?researchers team for these insightful findings:

Lexi Clarke Scott Torrey

Dave Ulrich ?George Kemish LLM MCMI MIC

#peopleanalytics ?#futureofwork ?#paytransparency #retention ?