Survey Shows Top Reasons for Employee Turnover and the Impact of Pay Transparency

A recent study shows that, while pay transparency can increase retention, other variables such as a company’s future outlook, fair pay perception, workplace culture, and manager relationships have a greater impact on why employees consider quitting their jobs. That’s according to data from the Retention Report, commissioned by Payscale Inc., a provider of compensation data, software and services.

“Although employees are slightly less likely to leave their jobs now than during the Great Resignation, there is and will continue to be an increase in demands from employees, and companies must directly address and understand what they can do to meet those requests in order to retain their workforce,” said Lexi Clarke, chief people officer at Payscale. “Employees are most likely to put in their notice if a company’s long-term viability is questionable or if they perceive that their pay is unfair; publishing pay ranges to job ads alone does not communicate fairness and may not be enough to drive retention.”

While pay transparency decreases intent to quit by 30% when analyzed in isolation, pay transparency surprisingly increases job seeking behavior for Generation Z by 3%. This is likely due to younger workers being more motivated to change jobs for a larger salary, especially if they see higher pay ranges advertised and don’t understand the rationale behind their current pay. This is why compensation strategy and pay communications are essential components of pay transparency.

Payscale’s analysis found that an organization’s future outlook is the most important factor for retention. With a constant deluge of layoffs and hiring freezes, communicating improved business health can decrease intent to resign by 39%. Employees are exceedingly tempted to jump ship and seek out a more stable role when they sense financial distress, so clear dialogue regarding organizational health is crucial to retaining talent.

The perception that pay is unfair also heavily impacts turnover. When raises don’t match inflation and better wages can be found in online job postings, employers must do more than just post pay ranges to job ads; they must also communicate how pay is determined, why it is competitive to the market, and how it can be progressed. Improving fair pay perception can reduce intent to leave by 27%.

The report also provides evidence that employees who feel that their workplace is negative or unproductive are more likely to hand in their resignation to preserve their mental health. When leadership acknowledges workplace dysfunction and makes a concerted effort to cultivate a positive company culture, intent to seek a new job declines in likelihood by 22%. Improved relationships between managers and their direct reports can also decrease job seeking behavior by 21%.

“To build transparent pay practices you need a compensation strategy that makes sense for your business, robust internal and external pay equity analysis, committed manager training, and meaningful pay communications with employees,” said Ruth Thomas, pay equity strategist at Payscale. “The objective should be for every employee to know their pay is fair and why it’s fair. Employers must go a step beyond posting salary ranges to really show they value their employees, while also proving that the company has a positive work culture and a bright future.”

Payscale’s 2023 Compensation Best Practices Report found that in the light of recent legislation, pay transparency is becoming standard practice to compete for new hires; almost half of all employers (45%) now include salary ranges in job postings. This is likely to expand. Payscale offers a Pay Transparency Solution that delivers comprehensive compensation data and software as well as professional services to help organizations of all sizes reach pay transparency objectives quickly, including publishing pay ranges with confidence, facilitating pay communications, and conducting pay equity analysis to embed fair pay practices. To learn more, visit Payscale.com.

The Retention Report analyzed crowdsourced data from over 578,000 U.S. workers who took Payscale’s online salary survey between March 2018 and March 2023. To determine the impact of select variables on retention, researchers employed a logistic regression model. The full report and its methodology can be accessed in its entirety on Payscale.com.

About Payscale
As the industry leader in compensation management, Payscale is on a mission to help job seekers, employees, and businesses get pay right and to make sustainable fair pay a reality. Empowering more than 50% of the Fortune 500 in 198 countries, Payscale provides a combination of diverse and dynamic data sources, experienced compensation services, and scalable software to enable organizations such as Angel City Football Club, Target, Gainsight, and eBay to make fair and appropriate pay decisions.