Comparison to other factors
Future outlook impacts retention more than pay.
When discussing what drives employees to quit their jobs, a lack of pay transparency is not what first comes to mind. A common adage is that people quit their bosses, not their jobs, but is that true? What drives people to start looking for a new job the most? Conversely, what factor is most important for retention?
In Payscale’s online salary survey, we offer participants a number of statements related to job satisfaction, with each possible response falling on a Likert scale where one is “strongly disagree” (negative response) and five is “strongly agree” (positive response). These statements include the following:
- Pay transparency: “How pay is determined at my company is a transparent process.”
- Bright future: “I am confident my employer has a bright future.”
- Company culture: “Interactions at my organization tend to be positive and productive.”
- Manager relationship: “I have a great relationship with my direct manager.”
- Fair pay: “I feel that I am paid fairly.”
According to our analysis, job-seeking behavior is associated with lower ratings across all of these variables. Bright future, company culture, and manager relationship outpace fair pay and pay transparency by a visible margin at more dissatisfied levels. In other words, intent to leave climbs highest if the organization is struggling, the culture is toxic, or the relationship with one’s direct manager is very poor. However, fair pay and pay transparency certainly have an impact on intent to leave as well.
To determine which variables have the highest impact on retention compared to the others across all level ratings, we used a logistic regression model where the intent to seek a new job in six months was the dependent variable and the above employment characteristics were the independent variables.
Our analysis revealed that bright future is the most important variable for retention overall, as each increase in bright-future ratings among respondents was associated with a 39 percent decrease in the likelihood of seeking a new job. This makes sense. 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.
The second most important variable across all levels in comparison to other variables is 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.
Company culture and 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.
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 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.