You did read that right! and it wasn’t a writing mistake. The title of this post is, in fact, how to increase a company’s attrition rate. Earlier today, I saw a post on Twitter that caught my attention. It was a tweet about people leaving a company for another due to a 30%+ increase in compensation.
It caught my eye because this is happening more and more these days. It’s nothing new, but the attrition rate at many tech companies has recently increased at a faster pace. Many people think it is part of the great resignation.
People leaving jobs to get better compensation is nothing new. Switching jobs is a common way to get a higher position and higher compensation. But why? It doesn’t make sense. But in general, companies focus and invest more in hiring new talent than retaining employees. As a result, companies spend a lot of money attracting new employees, recruiting, signing bonuses, etc. While increasing salaries by a few percentage points and fewer stock options for existing employees, why? Yes, I agree. It makes zero sense. And I feel like no one wins here, nor the employees or the companies.
I am familiar with the amount of time and money invested in recruiting new employees, specifically tech talent. It’s not easy. It takes time and money and is a big distraction for any company since their most senior engineers often direct interviews for new candidates. However, these very senior engineers will then go to another job because their compensation (base salary + stock + bonuses) is either stagnant or increases a few percentage points every year.
In the tech industry, when you switch jobs, often your compensation will increase by at least 20%, that has been my own experience, but I am sure it varies a lot. The point is, a compensation increase of 10% or more is not something most people experience. Therefore they end up moving to other companies. Sometimes companies who will not increase employee’s compensation significantly, are the same companies who will offer much higher compensation to convince someone new to join them…
When you hire a new employee, it takes time to get them for them to get familiar with the company, the team, and the work before they are efficient. And again, after a few years, if these employees don’t feel fairly compensated, they will leave for another job. Employees switching jobs is normal, but what’s not normal is allowing good employees who like their careers to seek other employment to achieve a higher compensation. At the same time, the company invests a lot of money and time hiring to replace leaving employees and fill new positions.
I understand that many people leave their jobs looking for a better culture, challenging new opportunities, and a better work-life balance. Still, in this case, it’s really about more compensation, something that more and more employees have in mind now, especially with the higher inflation rates.