The Effects of Salary on Job Retention

Job retention rates usually depend on a number of factors, including employee morale, job satisfaction and salary. Other influences include benefits, work environment and professional development opportunities. According to the Society for Human Resource Management, small businesses should expect a certain amount of turnover as employees seek increased pay, responsibility or challenges.


  1. Employees typically consider their salary to be the primary motivation to come to work. Other factors that positively influence job retention include flexible work schedules, training opportunities and other amenities, such as bonuses or extra vacation time. However, if an employee feels that she works harder than another employee who receives a higher rate of compensation, she may leave for a higher paying opportunity. Highly paid employees tend to be more motivated to remain in their jobs.


  1. According to the Society for Human Resource Management, base salary increases for U.S. employees decreased in 2009 because of economic conditions. Small business owners trying to attract, retain and reward top talent can take advantage of these employees seeking new jobs. On the other hand, trying to retain or hire talented, qualified workers in specialized areas may be difficult if the company’s financial situation prevents the HR team from paying employees at or above the median wage reported by the Bureau of Labor Statistics Occupational Outlook Handbook.

Turnover Costs

  1. The effects of salary on a company’s job retention rate also relates to costs associated with locating, interviewing, hiring and training new employees to replace workers who seek higher wages at a different company. Small business owners should consider the return on investment for offering valuable employees a counteroffer, perhaps including additional benefits or other perks. This can encourage an employee to remain in his current job and prevent the business from suffering a disruption. Many companies can't afford to lose the business intelligence, skills and knowledge possessed by talented employees. Effective small business owners analyze the market conditions, weigh the options and make offers based on sound business advice.


  1. According to the Society for Human Resource Management, in a 2008 job satisfaction survey, 92 percent of employees stated that compensation held some level of importance. Small business owners shouldn’t underestimate the effect salary has on job retention. With the increased availability of job search engines, such as and, employees have easy access to databases containing a competitor’s job listings. When financial rewards remain constrained, small business employers should consider promoting a total rewards package, including training and development opportunities, promotions and recognition events.