Cost of living elevates salaries and perks as key drivers of employee retention in 2024

Cost of living elevates salaries and perks as key drivers of employee retention in 2024

Photo: Rivage, via Unsplash

The cost of living is making salaries and perks just as important as flexible work arrangements and career development programs for employees in 2024, according to the latest research by risk management and consulting firm Gallagher.

In its third annual Workplace Wellbeing Index, Gallagher has revealed a big shift in what employers have to offer their staff if they are to retain or recruit top talent.

However, despite a weaker employment market, the index also recorded a slight improvement in workplace wellbeing over the past year, rising five percentage points to 53 per cent.

“While last year’s report reflected a battle to attract and retain skilled workers, this year saw a slight softening of the labour market driven by increasing immigration and declining job vacancies,” says Dr Scott Krebs, head of HR and people experience consulting at Gallagher.

“However, the pressure for organisations to provide a compelling employee-value proposition and duty of care around staff wellbeing remained critical.

“Our research reveals that low wellbeing continues to present a growing risk that impacts the bottom-line and presents a significant opportunity for employers to differentiate their offerings by striking the right balance between remuneration and other benefits.”

The Workplace Wellbeing Index takes the temperature of how Australian employers are tracking in providing positive, safe, and effective workplaces for employees with this year’s report compiled from a survey of 2,499 full-time, part-time and casual employees nationally.

Wellbeing remains critical for Australian employees, with 74 per cent saying it is one of their top priorities over the next month, with about 10 per cent of those surveyed revealing they have resigned due to poor workplace wellbeing.

But unlike previous years, base salary has emerged as a key driver of intentions to stay in 2024.

“While financial and cost-of-living pressures have impacted Australians in general, younger workers who have never witnessed a high inflation and high-rate environment before, are not well placed to manage that,” says Krebs.

“Employers must proactively respond to these concerns by reviewing their ‘remuneration, rewards, and benefits’ to remain competitive in attracting new talent, whilst not leaving the existing workforce behind.”

For employers who think the work-from-home may be on its way out, the report confirms that the appetite and expectation of flexible and hybrid working has not diminished.

Regardless of employee age or industry, a flexible working arrangement remains the number one must-have benefit for workers aged 35-plus and number two for those aged 18 to 34 behind professional training and development.

But amid a weaker employment market, bosses are pushing to take control with the report finding that in some sectors staff are being lured back into the office by linking this to career progress and promotion.

“When designing a benefits program, it is vital to consider people’s life stages and other key demographic factors, as staff are likely to have different challenges and needs depending on their stage of life,” says Krebs.

“With flexibility confirming its top spot as the most important benefit to employees, it is critical for leaders to trust their people and empower them with the right resources and environments to thrive.”

Krebs warns businesses that fail to take responsibility for people’s wellbeing can find it costly in the long run. Costs may be incurred through sickness and injury claims, lower productivity and engagement, and lower retention that leads to ongoing replacement costs.

The report found that two-thirds of workers with low wellbeing say they have experienced a mental health-related injury in the last 12 months, compared to 5 per cent of people with high wellbeing.

While employees with low wellbeing are at a higher risk of experiencing both mental health-related and physical injuries at work, mental health conditions also come with a significant personal impact as well as a financial cost for organisations.

“This makes it even more crucial for employers to provide a safe environment for their staff to communicate mental health problems to their superiors without being stigmatised,” says Krebs.

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