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.”
Why Employees Would Take Less Money to Leave
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.
That’s means workers may be more tempted by a pay increase.
“If employees are unhappy with their current job, it makes sense that a pay increase, even a slight one, would entice them to switch,” she said. “Cost of living and inflation are top of mind for employees, so if there’s a new job that offers a little more financial stability, employees will likely take the opportunity.”
Additionally, Tarp noted, employer stability plays into employees’ decisions. “If an employer has reduced overall headcount and an employee now has fewer opportunities for growth, moving to a job with more stability and a pay bump could be a very attractive and enticing option.”
What Employers Can Do
Employers might want to combat the issue by regularly reviewing and adjusting compensation packages to ensure internal equity, and keeping pay competitive and aligned with employee expectations, Tarp said.
Ruth Thomas, pay equity strategist at Payscale, agreed, saying workers are still overwhelmingly feeling the burden of higher prices, contributing to “tensions on growing wealth inequality and potential unrest.
“Employers should ensure pay increases remain strong and consider salary adjustments to keep up with market changes and to avoid turnover from employees seeking better pay,” Thomas said.
It’s also a good time for HR and benefits leaders to emphasize the value of employees’ total compensation—including their benefits offerings. That will give employees a clearer understanding of the value of what they get through their workplace, and it might give HR teams a chance to consider any gaps in employer coverage they may want to rectify.
“Employers should conduct periodic evaluations of benefits offerings to ensure alignment with employee needs and market trends to demonstrate a commitment to providing competitive and valuable total compensation,” Tarp said. “The key to developing the right benefits package will also lie in communication—regularly communicating any potential changes in benefits or costs to help employees understand the value of their total compensation package beyond just salary.”
Also important is regular communication about the health of the company, which is important to employees as they worry about economic uncertainties and smaller raises and see layoffs in the news.
“Although money isn’t the only motivating factor for employees, job security is looming large, with most employees tying that to salary,” Tarp said. “While certain things are out of an employer’s control, those who take the time to understand this and communicate regularly about the company’s health and direction will see higher levels of loyalty and employee satisfaction.”