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How Does Compensation Influence Recruiting and Retention?


What causes a high-performing, happy employee to leave their employer for a new opportunity?

Why does a seemingly perfect job candidate, who expresses excitement over a role and company, choose a different offer instead?

These are two common questions employers ask themselves that often have the same answer – because of compensation.

Helping employees today is the current state of the job market which is giving them leverage. Unemployment rates remain low and there are more jobs available than there are workers looking for new opportunities.

This is causing headaches for employers who struggle with solutions to their recruitment and retention troubles. But taking a close look at employee compensation could be the key to overcoming these challenges.


Gartner’s 4Q18 Global Monitor report highlighted how valuable total compensation continues to be for employees.

When thinking about switching companies, workers are seeking at least a 15% increase in their compensation. This puts pressure on current employers to either match the offers current employees are receiving or lose them to other companies.

The report also highlights an interesting trend in response to these employee demands – employers are offering higher salaries to job candidates that are already employed.

And according to Gartner, this is creating a new issue for employers:

“Globally, workers expect significant compensation increases of 15.5% to switch companies, and the annual wage increases that companies currently offer will never match that. The result is a new wage gap that is forming where new employees are paid more, sometimes significantly more, than tenured employees,” says Brian Kropp, group Vice President of Gartner’s HR practice.

This trend could ultimately lead to lower retention rates, as employees see that the best way to get the compensation they want is by leaving their current employer for a new opportunity.


Further data from the Gartner report shows a few trends in worker retention. 44% of U.S. workers expect to stay with their current employer, up 4% from last quarter. It’s also 11% higher than the global average.

But this doesn’t mean that employers should ignore retention strategies. As a matter of fact, Gartner recommends creating an Employee Value Proposition (EVP) that consists of a few factors that job seekers and current employees view in high regard, such as:

Even small employers shouldn’t overlook the value of having a great Employee Value Proposition. Gartner found that by delivering on their EVP, employers can decrease their annual employee turnover by 70% while increasing job candidate commitment by 30%.

Both of these outcomes have significant positive impacts on an organization.


Talent management strategies are more important today than ever before given the challenges with recruiting and retaining talent. And overlooking one will cause even more issues for the other.

Employers who are overcoming the competitive job market have implemented initiatives that help to improve both attracting workers and keeping current employees with the company.

Things like better benefits, improved workplace perks, employee recognition, and enhancing company culture all go a long way making an employer a great place to work!

Want to learn more about PEOs? Check out our eBook, How Well Do You Know PEO? This eBook provides an overview of the PEO industry as well as helpful information for brokers and employers!

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