How Wages Impact Your Employee Turnover

Use our hourly wages-retention calculator to see the correlation between wages and retention.

Tools

Select the average hourly wage you pay—or want to pay—your employees. Then, you’ll see your projected monthly turnover percentage for that wage.

Cost of Minimum Wage Calculator

Why today’s market means wages must rise.

Turnover is one of the biggest problems for U.S. employers. It’s costly and destroys productivity.

In the current labor market—with low unemployment, and openings outpacing hires—job candidates have leverage. This means your company must work harder to recruit the right people and keep them for the long haul.

A recent Adecco piece,“The 2018 U.S. Workforce Report: Attracting Talent and Retaining Employees,” which surveyed 1,000 American workers, revealed that 60% of respondents received two or more job offers the last time they searched for employment. Job seekers are applying at multiple places at a time, and then selecting the most appealing option. When we asked the same group about their most important job factor, 42% said pay.

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Lower wages mean higher turnover.

There’s plenty of research that shows the correlation between low wages and low productivity (and lack of employee engagement). But we wanted the numbers—the hard proof—that define the relationship between wages and retention. For primarily blue-collar positions, we wanted to be able to predict monthly turnover percentages and costs based on hourly pay. And that’s exactly what we did with our hourly wages-retention calculator.

Here's what we found out:

  • 1st to 25th percentile: Up to 30% turnover per month
  • 25th to 50th percentile: Up to 25% turnover per month
  • 50th to 75th percentile: Up to 15% turnover per month
  • Above 75th percentile: Below 10% turnover per month

It’s also worth noting that some lower-paying companies actually spend more than some higher-paying companies when it comes to workforce management. Why? Because the lower-paying companies have higher turnover costs in the form of job ads, onboarding, training and opportunity costs. Not to mention, poor culture and productivity issues.

Our data below found that in addition to higher turnover the lower an organization paid, 50% of that turnover occurred within the first 45 days of a new hire starting a job. That’s very little time for an organization to see any ROI from their hires before loosing them due to poor wages.

Additional factors that contribute to turnover:

  • Inconsistent work schedules, shift assignments and short term project work
  • Overtime causing fatigue and strain on child care, transportation and second jobs
  • Poor work environments with insufficient boarding, training and feedback

While there are myriad secondary factors that make for a happy workforce, reducing turnover and maximizing productivity begins with pay. Your initial offer to job candidates must be competitive, and as those former-candidates-turned-employees ascend through your organization, their pay should ascend equally as fast. While this “pay them to keep them” approach isn’t hot-off-the-press news, our data is. The numbers tell the entire story—and give you the science you need to succeed.

Additional sources to consider when evaluating pay within your organization: