How to Avoid Costly Turnover with a Simple Compensation Check

Reward Factors Tip: Your biggest cost this quarter?  Employee turnover.

The average cost of replacing a high-performing employee can exceed 1.5x their salary. That loss does not just hit the budget; it stalls momentum and drains morale. The solution is not a quick fix—it's a compensation audit.

Before you hire another recruiter to replace those roles, understand the reasons they are leaving.

1. The Exit Data (Market Data & Retention): Avoid relying on exit interviews. Instead, audit the pay of your last five voluntary exits. If they are below market by 15% or more, your market analysis may be the challenge, not the culture.
   

2. Pay Rationale: Audit a group of employees in the same job but with different pay rates. Can you identify the reasons for the difference (e.g., newer in the role, top performer)?  If you cannot clearly articulate the reasons for the difference, you have a flight risk and a foundational problem.
   

3. Philosophy: Interview five of your existing managers. Ask them, "What is the single most important factor we use to determine salary increases?" If you get five different answers, your compensation philosophy is broken, and managers are creating inconsistent employee experiences.

Something You Can Do Today: Take your last voluntary resignation and multiply their annual salary by 1.5. That is your minimum cost of replacement. If this was one of your top-performers, ask yourself: Was that amount enough to fix the compensation issue before they left?

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