Missing the Motivation
It’s extremely important to understand the motivation points for an employee who’s thinking of leaving. Ask the question: is money their main motivator? In other words, if you match the extra $20,000 or $30,000, is it going to make a difference in their decision-making?
Perhaps your employee was approached by a recruiter out of the blue, and though they are glad to be offered the extra money, they are very happy working in your organisation in every other way. If this is the case, matching the salary offer is probably worthwhile to keep the employee. However, they may start thinking ‘why didn’t you pay me this before the other offer? It could actually cause bad feelings and disgruntlement.
And what if they aren’t happy at your organisation? If you match the salary, they’re not necessarily going to take your offer. I’ve seen this happen – someone puts in their resignation and the current employer immediately makes a counter-offer to increase the employee’s salary. But the employee says, ‘Actually, the other job is a much better match for my career goals, and that’s really why I’m taking it.’
But then the employee tells their colleagues about the counter-offer. So now the whole team feels that there is inequity in the organisation’s pay policies. They’re thinking ‘why did they offer that person more money, but not me?’ And a feeling of inequity leads inevitably to reduced engagement from your team members.
Redundant Retention Bonuses
Another thing I’m seeing at the moment is employers implementing retention bonuses. They want to be proactive in keeping their star performers, rather than reacting when their employees get a call from a recruiter. So they tell employees if you stay for 12 months, or 24 months, you’ll get a financial bonus.
But if an employee is not motivated by money, that retention bonus is not going to make any difference to them. If the right job comes along, they’re going to go anyway. On the flip side, if they’re happy in your organisation, and they’re not interested in leaving, you’ve just paid them a lot of money for no reason. And again if you apply these bonuses selectively, you risk creating a perception of inequity. Why is one person so important to your business that they get a retention bonus, while someone else does not?
Salaries Set at the Wrong Level
If your team member is being offered a lot more money for an equivalent job in another organisation – not a promotion, but a similar job in a similar-sized organisation – your salaries may not be set high enough.
It’s well documented that in the Australian employment market, salaries have been stagnating for a long time. However, pockets of the market are seeing change, particularly in the IT space. Low immigration rates, linked to Covid-19, are creating a lack of supply in Australia in certain roles, which is driving prices up.
If your employees are finding higher salaries elsewhere, it’s important to consider if you have a problem with your salary levels. As we saw in the last post, Paying Fair – Do you have a Transparent Pay Policy? it’s a good idea to ensure your pay policy is transparent.
The next things to consider are the long-term impacts of implementing reactive strategies in your business. For a start, there are the financial impacts, which can be quite considerable if you are thinking about giving an employee an extra $30,000 per year.
Also don’t forget about the long-term impacts on equity, and the perceptions of equity, in your workplace. If you give one employee an extra $30,000 per year, you may also need to give the whole team a pay increase, or risk disengagement that could lead to further resignations.
The Golden Handcuffs
The Golden Handcuffs appear when an employee doesn’t actually want to work with your business, but they know they won’t be paid at the same level anywhere else. Perhaps they don’t like the organisation anymore, or they don’t like the culture, or they’re sick of the job. The problem is, they’re being remunerated so generously that they can’t leave.
There is nothing worse than an employee who feels stuck because that person will become increasingly disgruntled over time. It’s not good for them, and it’s certainly not good for you.