Economy

One Common Reason Good Employees Quit

July 21st 2017

By:
Kyle Jaeger

There are plenty of reasons why a good employee might quit—but the perception that they're being underpaid, especially compared to new hires, is chief among them.

Sean-Spicer

"[E]mployees are concerned particularly with pay compression," and "the differential in pay between new and longer term employees," the financial site The Balance explained. "In organizations, with the average annual pay increase for employees around 2 to 4 percent, employees perceive that newcomers are better paid—and, often, they are." 

This meme lays out this common employee concern. 

meme

Resolving internal pay equity issues could be as simple as increasing transparency around wages.

Human resources experts have argued that when it comes to complaints about pay, "perception is reality," meaning that the onus is on the employer to ensure that their workers understand how pay it determined, how to maximize their salaries, and how their performance relates to their pay. 

When these standards are met, both the employee and employer benefit. 

"[E]mployees who believe they are fairly paid are more engaged, are less likely to quit, experience less stress at work, feel healthier physically and psychologically, and are more satisfied with their personal life," according to a 2003 report published in the journal World at Work. 

one-dollar-bill

But when transparency around pay is lacking—and employees get the sense that new hires are getting higher levels of compensation—that can be a central motivation to quit. The compensation software company PayScale surveyed 71,000 employees in 2015 and found that "a company's ability to communicate clearly about compensation" was "one of the top predictors of employee sentiment, including 'satisfaction' and 'intent to leave.'"

"Pay is a crucial component of engagement because it’s not just a number; it’s an emotional measure reflecting how valued an employee feels by their employer," Dave Smith, PayScale's chief product officer, wrote for Harvard Business Review.

"And it turns out, how people feel about their deal plays a huge role in how engaged they are in their work."