Does Payrate Affect Employee Retention?
In the lead up to the National Living Wage increase on April 1st 2021 we asked Northamptonshire businesses what their plans were regarding the increase. The survey was aimed towards Warehouse, Distribution, Manufacturing and Production settings and the results identified valuable insights and trends.
According to the REC’s Recruitment and Recovery Report in February 2021; quality of staff and recruitment are “the most important driver” of businesses.
However, we know employee retention is a major issue in the industrial sector. An ONS survey conducted in 2018, 27% of employees in the Manufacturing sector, are working for a different employer within a year. The Transport and Storage sector saw 29% move, and Construction saw 30% of employees move employers within a year. 2018 being a few years out of date though, surveys that have been conducted since are showing a slight decrease. Data gathered at the end of 2020 saw a general decrease of average labour turnover to 20.9% across all sectors, making a note though, that the Coronavirus Job Retention Scheme, Brexit and continuing coronavirus consequences could be reasons why turnover has decreased. It is reasonable to assume that with the security of Brexit having happened and the vaccine programme being rolled out, plus more and more furloughs ending, that employees will start looking for new jobs again soon, and increasing turnover rates again.
With 2021 recruitment trends reflecting an expected increased demand, the UK's industrial sector will require more candidates to meet increased supply chain pressures. Employers who are constantly topping up lost employees will drain existing talent pools and should instead be looking at a more sustainable method of retaining the best talent through a review of their employment packages.
In this blog we’re taking a brief look into the benefits of a great pay rate as part of a successful employment package.
Improving Employee Retention
Increased salary improves the likelihood of keeping candidates and not have them lured by your competition through a higher wage. This is essential since the 2021 recruitment trends suggest the industry will be candidate led. Those with strong talent pools will have the personnel to meet demand and accept work.
A simple pay rise retains employees and boosts their productivity. Employees found to be happy at work deliver 12% increased productivity, and while 12% is a small percentage; once applied across the whole workforce, the return is a lot bigger in the impact of commercial production capacity.
Being able to meet the demands of bills and family with a wage that reflects the actual cost of living, is understandably extremely important in combating stress. Whether it’s work or home related, stress is proven to have a negative effect on quality of work.
The hidden cost of hiring and onboarding new staff is a cost not covered or reflected often by regular hirers. The average price of recruitment for a new employee in the UK is £3,000, taking up to 27.5 days to fill a position. Although it seems counterintuitive, paying more can lead to cost reduction when it comes to retention and turnover.
There is a strong argument for employers to consider paying the Living Wage, which we delve into in our blog Is Increasing the National Living Wage Enough?. However, pay rate is just one of the factors that drive candidates from job to job as our Sales Manager Matthew Hopson explains.
"With attraction and retention key topics now we have exited the EU, we have received more consultation than ever to ensure our clients attract the top talent in the area and retain these employees. Whilst pay remains an important part of this process, employee engagement, culture and environment are proving more important than ever”.
We will be looking at further ways to increase employee retention over the coming weeks, but in the meantime please view the results of our National Living Wage survey.