-

Compensation plan & impact to the employee turnover

According to Bryant & Allen (2013) ‘when we ask our clients why people quit jobs, pay is almost always the first or second reason provided. People do quit because they are unhappy with their pay. Also true is that people often quit to take higher paying jobs elsewhere’.

According to Palmer, 2006 cited in Bhatt & Sharma (2019), the employees of today know about how much they are worth and tend to walk away from the negotiating table if they feel that the pay which is being offered to them is not good enough.

It is said that Compensation is directly linked to an employee’s livehood. Employees can receive stellar training, good career growth and be fully satisfied with their work and the environment but they will not show up to work if there is no paycheck in return. Therefore, below strategies can perform by any company to have a good compensation plan which help to reduce employee turnover. (Bohlander & Snell, 2012).

The pay for Performance Standard. – Paying for high performance and keeping them with the organization which helps companies to retain high performers. When deciding on a pay companies should consider below factors to have a good compensation plan to the company. Figure 2.0 explains those internal and external factors to be considered when planning for a compensation plan. (Bohlander & Snell , 2012).



           Figure 2.0 – Factors effecting the pay mix by Bohlander & Snell (2012), 379.


Pay Equity- This model explains that companies should pay employees equally otherwise employees will compare. There are 3 kinds of pay equity. (Bohlander & Snell, 2012). 
  • Externally equity – People in similar jobs compare themselves to what others are making in different organizations. 
  • Internal equity – people compare themselves to peers in different jobs in the same organization. 
  • Individual equity – people compare themselves to others in their organization with the same job. 


Expectancy Theory - Explains that the company needs to pay for High work and effort of employees. This model leads that high effort will lead to high performance. (Bohlander & Snell, 2012).



 

Reference:

Allen D. & Bryant P. (2013) Compensation, Benefits and Employee Turnover HR Strategies to retain top talent. Sage Journals. [Online] Available online http://cbr.sagepub.com/content/45/3/171 Accessed on 05th April 2022. 

Bhatt R. & Sharma M. (2019) compensation and employee turnover intention: a study with respect to IT industries conducted in gandhinagar city. International journal of research and analytical reviews,6 (1), 374-377. 

Bohlander G W & Snell S A. (2012) Principles of Human Resource Management. 16th Edition. South-Western: Cengage Learning.


 

 

 

 

 



Comments

  1. Pavani Damsara SamarasingheMay 5, 2022 at 11:21 PM

    Hello Dulanjana, I agree with your blog. Associations between the usage of alternative pay methods and business turnover rates are predicted using reasoning from the organization economics research. In a sample of 153 New Zealand businesses, the utilization of skill-based and group-based pay systems was compared to company turnover rates. The usage of skill-based compensation schemes enhances employee retention, but group incentive programs are linked to higher turnover, according to ordinary least squares regression results. The latter relationship becomes stronger as the size of the organization grows. (Guthrie, J.P., 2000)

    ReplyDelete
    Replies
    1. Dulanjana Hashali PeirisMay 13, 2022 at 9:06 PM

      Hello, Agree with your comment. But it is also stated that group incentives apply when teams of employees work together on projects. Awarding group incentives helps by encouraging team members to work together toward a common goal and creating an environment suited to mentoring junior employees. (Brown, Lanis, & Bairstow, 2014)

      Delete
  2. Maheshani Priyankara Weerarathne (Maheshi)May 6, 2022 at 9:07 PM

    Hi Dulanjana Agreed with you, according to Chan et al. (2010) also state employee turnover as a serious issue, particularly in the area of human resource management.

    ReplyDelete
    Replies
    1. Dulanjana Hashali PeirisMay 13, 2022 at 9:13 PM

      Hello, Yes correct. Managerial factors, Working environment, Pay, Fringe benefit, Career promotion, Job fit , clear job expectation are some of other factors which is related to HRM which are effecting employee turnover. (Al Mamun & Hasan, 2017).

      Delete

Post a Comment

Popular posts from this blog

-
Image
Identifying employee satisfaction level can help to retain staff.   Job satisfaction is simply how people feel about their jobs and different aspects of their jobs. It is the extent to which people like (satisfaction) or dislike (dissatisfaction) their jobs (Spector, 1997 cited in Khan S. S. 2015). Further, job satisfaction is the amount of pleasure or contentment associated with a job. If you like your job intensely, you will experience high job satisfaction. If you dislike your job intensely, you will experience job dissatisfaction (Locke,1976 cited in Khan S. S. 2015). There are different ways to identify employee satisfaction level. Here below explained few points.  ( Nevogt, 2020). Conducting employee satisfaction survey.  ( Nevogt, 2020).  This way is the most common way of identifying employee satisfaction level. With the survey results company can identify what staff like and dislike. Companies can add more areas like Leadership of CEO / Leadership of senior ...
Read more
-
Image
  HR planning strategies and it’s impact to employee turnover. HR Planning is referred to as Manpower planning has been defined as the process of getting the right number of qualified people to the right job at the right time (IPM, 2010). The long-term success of any organization ultimately depends on having the right people in the right jobs at the right time. (IPM, 2010). When hiring the best talented staff, it is so important that you follow best strategies to collect best fits among job markets. (IPM, 2010). According to Snell & Bohalnder (2012), following strategies were identified which any organization can use when hiring right candidates. Recruiting Internally – Internal Candidates are readily available, get up to speed faster and there is less uncertainty about how they will perform (Snell & Bohalnder 2012). Internal Job posting - Posting vacancy advertisement as an internal notice or publishing on their intranet sites (Snell & Bohalnder 2012). Ident...
Read more
-
Image
Proper Training & Development program helps to motivate staff to stay with the company.  Many companies are struggling to survive and are concentrating on developing efficiency at all levels of the company and retaining staff with the company. This has triggered the need to build a high quality and multi skilled work force which is highly predictive, efficient, and adoptable to change. Due to this reason, most companies are realizing the importance of training and development as a part of company plans. (IPM, 2010). Oluwaseun (2018) said that investing in training and development enables employees feel more connected, valued, accountable, focused, and part of the team. Further it has been proven to increase employees’ sense of loyalty and decrease turnover. ‘Training and development are the processes of investing in people so that they are equipped to perform well and are part of an overall human resource management approach that hopefully will result in people being moti...
Read more