Leveraging Competitive Compensation to Retain Top Talent

Two recent studies on employment trends provide some invaluable insights for organizations concerned about retaining top talent. The first, by an employee job-search tool company, shows 56% of surveyed employees want to change jobs in 2025 — which likely means more than half of your people are considering jumping ship.

If that worries you, the second study, by the Pew Research Center, may provide some peace of mind because it reveals the top reason your workers are looking elsewhere: money. Provide competitive compensation and you likely will address the top-cited reason employees leave.

This article outlines some steps you can take to establish the type of compensation practices needed to retain your top talent.

Get a Firm Grasp on What Is Competitive

Knowing how to win often starts with knowing what you are up against. For organizations seeking to establish competitive compensation strategies, that means taking some time to understand what others in your industry are offering.

A variety of resources can show you what other employers in your industry are paying. Glassdoor, for example, provides the pay range for hundreds of positions, adjusting it for an employee’s years of experience and the geographic region in which they work. The data provider and similar sites regularly confirm the figures through workforce surveys, so employers can have a high degree of confidence in the provided information.

To enhance your competitiveness, seek to identify the factors that employees find most compelling when added to the pay proposition. This can involve general research on the job marketplace or surveying your own employees to see what they appreciate and perhaps find lacking in their current experience.

Sign-on bonuses, stock options and other incentives are generally appealing. In addition, employees and job candidates may put a price tag on workplace flexibility. For example, a recent survey revealed the value employees and job candidates place in remote work opportunities, with 48% saying they would “definitely” be looking for such setups in their next position.

Develop a Pay Structure that Sets You Apart

Once you’ve done your homework on industry standards, sit down and iron out a pay structure that will bolster your competitiveness. Providing salaries at the top end of the industry’s pay range will definitely set you apart, but if you don’t have the financial resources for that (few organizations do), get creative and develop a total package that increases your attractiveness.

Including profit-sharing in compensation packages can help those who don’t have the budget necessary to hit the higher end of the pay range. To encourage strong retention rates, organizations may spread such a benefit over a number of years. For example, one year’s profit-sharing can be split into thirds, with the first third given during the current year, the next third during the following year and the final third two years out. That type of divide-and-stacking structure can create the opportunity for larger profit-sharing each year the employee sticks around.

Also, consider ways to ensure your pay structure is fair and equitable. Factor in experience, skill level, performance and job responsibilities when setting pay amounts. Those who are clearly making an outstanding contribution — as top talent often does — should see it reflected in their compensation.

Communication Compensation Clearly and Transparently

In years past, it was common for employers to have a “don’t ask, don’t tell” approach to compensation. Today, they are taking a different approach, driven in large part by domestic or international laws and a shift in employee sentiment.

According to recent studies, 81% of Gen Z workers, 75% of millennials and nearly half of those in Gen X expect employers to be transparent about compensation. Concerns over pay gaps, equity and biases are top of mind and generating action. Some workers also see pay transparency as a sign of an open and honest work culture, which has become highly sought after by job seekers.

To retain top talent, employers today likely need be more transparent about their pay and how employees can maximize their compensation potential. Publishing compensation practices, explaining compensation decisions and including updates on compensation considerations in regular performance reviews may help with such openness.

Losing top talent can be quite impactful for an organization, but addressing the compensation side of total rewards is one way to mitigate that risk. By understanding industry pay standards, building competitive packages and committing to high levels of transparency, organizations may better meet employee expectations and keep them engaged.

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