Is Your Compensation Strategy Working for Your Business?

Most organizations design compensation plans to reward people and give them an incentive to stay. Compensation is a tool to attract, engage, and retain talented people. Effective strategies break down the silos between compensation and other related key factors affecting employee retention. Whether your organization handles compensation “on the fly” throughout the year, or spends months designing a plan, follow these key principles to get the results you seek.

  • Pay fairness and equity: Extreme gaps between the highest and lowest paid employees hurts morale and increases turnover.
  • Pay procedures: Secretive processes lead to mistrust, undermining employee engagement and retention. Transparency enhances accountability and trust.
  • Type of compensation: Higher levels of health/retirement benefits offset lower salaries.
  • Vesting: When crafted carefully, and properly communicated, long-term vesting in various benefits
    (bonuses, retirement, ownership, etc.) boosts retention.

Attracting and retaining top talent is a key concern for most MSEC members. This is closely linked to compensation, but successful efforts to reduce turnover go far beyond that single component. Surveys show employees start disconnecting from their employers far earlier than when they begin actively look for new jobs. Their decisions to leave may be for reasons other than compensation, like poor relationships with their supervisor, lack of career growth, and overall workplace culture.

Research shows that compensation (pay and benefits) is not enough to engage and retain your top performers, you must also have:

  • Supervisors: The relationship between employees and their immediate supervisors is perhaps the most important workplace relationship. Employees disengage quickly if they do not feel respected, supported, and valued by their supervisors.
  • Relationships with Other Employees: Employees who are connected socially with their co-workers are less likely to depart. What does your organization do to promote such positive relationships?
  • Career Growth and Professional Development Opportunities: Employees who see future growth opportunities and support to guide them to these are more likely to stay. Even if their compensation is less than what they want.

For help with compensation practices, contact MSEC at 800.884.1328 or email


PayScale 2014 Compensation Best Practices Report
• 79% of respondents agree pay is often not the primary reason people first start looking for a new job
• 50%+ of companies of all sizes list employee retention as a top concern