Concerns About Employee Retention?

With the forecasted economic rise in 2011, employers are increasingly worried about losing top performers. While the economy has been down, companies have focused on nonmonetary rewards for employees, including career development and training. However, with the economy rising, top performers are likely to begin demanding monetary rewards. The outcome of economic upturn will differ for different business sectors. Those who come out of the economic downturn earlier are more likely to keep their top performers, while those who do not move with the economy could be vulnerable to losing some of their key performers.

An upcoming trend forecasted for 2011 is the move toward variable pay as a way to increase monetary benefits without increasing an employee’s base salary. Because of its dependence on employee performance, variable pay would allow companies to reward their top performers while maximizing pay dollar distribution. According to the June 2010 Kiplinger Letter, twenty years ago, variable pay accounted for less than 4 percent of compensation whereas today, it is nearing 12 percent and continues to rise. This begs the question, “what will be the role of variable pay in addressing the upcoming retention issue?”