COMP NEWS – A new report highlights the drastic effect that low pay raises have on employee retention.

As employers mull their 2024 compensation plans, a new report reveals how workers feel about pay—and how much less of a raise it would take to sway them from their jobs.

Significantly, 73 percent of employees said they would consider leaving their current job for a higher paycheck, according to a survey of 1,500 workers from HR tech firm BambooHR.

They also noted they’d quit for a smaller raise than previous years. Respondents said it would take a 13.3 percent pay jump to tempt them away from their current position, down from 16.1 percent in 2022.

It’s a significant finding indicating that employees are more likely to leave for extra cash in their pocket. That means employers may have to act to avoid more turnover problems, said Kelsey Tarp, senior manager, human resource Business Partner at BambooHR.

“Money is still a key driving force behind employee satisfaction, happiness and retention,” she said. “If a small pay increase is all it takes for an employee to leave their current role, employers should prioritize looking into market trends and adjusting salaries accordingly to attract and retain top talent.

“The cost of getting compensation wrong is easily realized in multiples later. When employers need to go to market for talent, they might find the salary ranges to be inadequate to attract the talent that is needed; there is wage compression to address—all of which will be more costly in the long run.”

Employee dissatisfaction with pay has been growing steadily over the past several years, particularly among women.

Part of the reason employees would make a move for less money may be because employee dissatisfaction with pay is growing. More than a quarter (27 percent) of women expressed frustration with their compensation (up from 16 percent in 2022) compared with 15 percent of men (up from 11 percent in 2022), according to BambooHR’s report. Just over 40 percent of workers haven’t received a salary increase in the past 12 months. For those who did get a raise, the average salary increase was 4.6 percent, compared with 6.2 percent in 2022.

Other research from consulting firms indicates that salary hikes will continue to slow in 2024, with employers planning an average between 3.8 percent and 4 percent hikes for employees in 2024. Smaller salary increases are occurring as inflation cools from its red-hot pace, but workers are still feeling the sting of months and months of high living costs.

The latest Consumer Price Index (CPI) from the U.S. Bureau of Labor Statistics, in fact, indicated that the fight to rein in inflation isn’t over yet, with the yearly rate of inflation rising to 3.4 percent, up from the 3.1 percent rate reported in November.

Indeed, high cost of living, coupled with other factors, like the pandemic and economic uncertainty, are causing employee satisfaction to decline, Tarp said, with BambooHR’s employee happiness index finding that employee happiness has declined for three consecutive years.

To read more about the study, click here.

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