Retaining More by Paying More
Monday, August 29, 2016 5:27:54 PM


Every employee has their compensation as the prime priority. Hence, it becomes imperative for companies to research what the demands of their employees are when it comes to compensation. It is also important to conduct a research on the standard monetary and non-monetary benefits that are prevalent in the industry. The compensation package must prove to be competitive enough to keep he employees hooked to your organization. So that they do not abandon the company for a different employer with higher compensation packages. Compensation constitutes for a huge chunk in the organization’s human resource development. Some of the areas where it plays a vital role are:

A high level of base salary may lure a young employee whereas a middle aged employee may prove to be a little more difficult to fish in the talent pool. According to’s John Rossheim, the recruiters must research the candidate’s prior and current salary along with the benefits, to get a fair idea of his/her priorities. A fresh graduate may prioritize on an attractive pay package whereas a settled family man may have his interests in the health insurance the company provides.

The compensation you offer to your employees directly impacts the level of job satisfaction. Though it isn’t the sole factor governing job satisfaction, but it is the most pivotal one. According to an article by Mae Lon Ding from Personnel System Associates, the compensation systems leave a positive impact on a large number of workers’ performance. Lots of employees feel motivated to lend a hand to their companies provided the company shares some profit with them.

Functioning on a vast scale with equal effectiveness and efficiency, demands higher retention rates from an organization. Retaining the talented employees saves the companies millions every year in training costs. Employees demand various types of compensation and some of the most demanded ones include retirement packages, health insurance, development opportunities, etc.


All these factors are important for an organization to function optimally. Their effects are always positive as far as the companies’ functioning is concerned. Many startups face issues when they have to design compensation plans. Since they are new to the industry and possess limited knowledge of the formal functioning and the standard compensations. Therefore, some of the factors they can analyze while designing a compensation plan are:

Amount of Requisite Skill and Knowledge
The factor that has the most direct form of influence on the employee’s compensation includes the skillset the person possesses. The employees with the highest pay are the ones that are heavily skilled at the functions they perform. They are competent majorly because they are:

  • Capable of working in teams and flexible environments
  • Possess enhanced technical skills that enables them to reach higher productivity

Organization’s Profitability
If yours is a highly profitable organization, the employees are more likely to receive higher compensations. If you sincerely believe in the vital role that human resources play in an organization’s performance then you will hire the top of the class, talented personnel. And these people are captured only through attractive compensation packages. Also, statistics projects that retaining the employees with high compensation plans eventually leads to a reduction in the turnover and training costs.

Market and Industry
Irrespective of high employment or low employment rates in the economy, the talented personnel with the required skillsets will always be high on demand. For eg: when the construction business booms, the demand for strong and skilled labor increases, which eventually leads to a rise in their daily wages. Therefore, if you are engaged in an industry that necessitates the need for talented personnel you will have to devise attractive compensation plans.