These things are all good, but it may impact what the great resignation looks like at your office.
If year-end bonuses and raises are the norms in your company, your employees may hold off accepting that new job until the money is in their pockets. While companies shouldn’t base new hires’ salaries on their previous salaries, many do, and employees can use it as a negotiating tool. After all, why would they leave a job for less money than they make now? And who wants to quit three weeks before bonuses hit the bank account.
This isn’t to tell you not to give people raises and bonuses–you’ll undoubtedly lose your best employees if you do that. This is to tell you to prepare and plan. Here’s what you need to think about.
Look at actual market rates for raises, not just a general cost of living raise.
Inflation is a huge problem–it’s affecting everything, including salaries. You can’t ignore the reality staring you in salary surveys. Yes, it’s more work to have your Human Resources department look at what it would cost to replace someone than it is just to allot a small percentage to everyone. Still, if you don’t do it, you’ll not only lose more employees, you’ll end up paying the higher rate for their replacements.
Remember, when you look at salaries, you’re not looking at competitors but at companies that use the same type of employees. Your warehouse employees can easily move to a package delivery service or a grocery store. Every business needs IT, people, and accountants. It’s worth the work to figure out what new salaries should be.
Consider long-term incentives.
Yes, people want their year-end bonuses, and heaven knows everyone has been through enough these past two years and could use the bonus. But, if there isn’t a reason to stay long term, people will be more likely to leave right after they get the bonus.
Make sure you have compensation that takes time to vest (stocks, or 401k matches, for instance). If you make that valuable enough, you can increase your employee loyalty and help keep people around longer term.
The best deterrent to resignation is better management.
Take your holiday bonus and enroll yourself in a management class. Heck, take your whole management team. It will be worth the money. Managing people isn’t the same as doing the work. You may have great ideas for products and services and be an absentee manager, a micromanager, or don’t know how to give meaningful feedback.
While people do want more money, it’s often lousy management that makes them start looking. This is a problem that is harder but cheaper to solve. Put real effort into increasing your management skills, and you may find your turnover dropping instead of increasing.
What if you really don’t have money for raises?
Many businesses are struggling, and handing out big raises to keep employees happy, causes your bank account to dip into the red. You need employees no matter what, or your business can’t run.
What do you do? Choose honesty. Let your employees know how much you appreciate them, explain the problem, and ask for their solutions. They may have cost-cutting ideas you haven’t thought about. You may need to restructure your company. Consider offering employees equity in the company in lieu of increases. This can give them the motivation to continue to work hard to make the company profitable.
Whatever you do, don’t hide from this scary reality. Your competitors are waiting to poach your best employees to be upfront. It can save some people.
Make your retention plans now. Waiting until the January rush out the door won’t help anyone.