Human Capital & Careers

Companies Are Worried About Employee Retention, But Don’t Plan to Raise Pay

A study from PayScale found companies are hoping to use perks and targeted increases to keep key employees.
Lauren MuskettFebruary 13, 2019

Sixty-six percent of companies said employee retention is a major concern, but a large majority of them don’t plan to raise compensation in a meaningful amount amid concerns the economy might be headed toward a recession, according to a survey from PayScale.

Sixty-nine percent of companies said they plan to increase base pay by 3% or less this year, just keeping pace with inflation. Nineteen percent said they planned no base-pay increase at all.

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Two thirds of companies said they planned to use bonuses to retain top performers and more than 40% said they gave base-pay increases of 10% or more for highly competitive jobs, such as IT positions.

“There is this uncertainty about the economy and a looming concern about a recession that is making many companies very cautious with their compensation budgets,” said Lydia Frank, vice president of content strategy at PayScale, in an interview with CNBC. “But if a company is being overly cautious and has retention concerns, this strategy of leaning into benefits might not be enough. Employees have a lot of options.”

Last year, 59% of companies said employee retention was a major concern.

In lieu of base-pay increases, companies may be offering more perks to retain employees.

The survey found one-third of companies will offer paid family leave in 2019, up slightly from last year. Nine percent of employers said they would offer unlimited paid time off, up from 5% three years ago. Forty-four percent of companies said they would allow employees to work remotely in 2019, up from 39% in 2018. Allowing employees to work remotely can help companies save money on office space.

“If you give a raise, you can’t take it back. No employer would want to do that anyway because of what it does for morale and productivity,” Lydia Frank said. “Benefits are easier to dial back or modify if a recession hits.”

The PayScale Compensation Best Practices Report drew on more than 7,000 companies that answered questions about compensation, employee engagement, and retention.