Firms Increasing Worry about Turnover as Economy Recovers

June 28, 2010 ( - As the economy recovers and workforce expansion rises, concerns about engaging employees and retaining critical talent are top of mind for many organizations, amid continuing cost pressures, according to Mercer’s 2010 Attraction and Retention Survey.

Despite efforts to engage employees during a difficult year, organizations have growing concerns about whether their valued employees will stay once the economy recovers. Almost two-thirds (62%) of companies believe that voluntary turnover will increase as the economy and job market continue to improve, according to a news release  

Moreover, Mercer’s survey shows that certain positions are more sought-after than others because of skill shortage or market demand. These roles include R&D/scientific engineering and sales, followed by information technology and executives/top management.  

Almost half (47%) of organizations that assessed employee engagement over the past 12 to18 months report that levels of employee engagement have increased. While the most common way to assess employee engagement is through employee surveys, more than half (53%) of organizations also gauge employee engagement through informal interactions with leaders, managers and employees. Focus groups and online forums are used by 33% and 7% of organizations, respectively.  

The announcement said more than one-quarter (27%) of participating organizations are expanding their overall workforce, while only 3% have instituted broad-based reductions.Cautious optimism prevails, however, as almost half (45%) of organizations are hiring to replacement levels only, while another 25% are hiring just for critical areas among select staff reductions.  

Mercer’s survey shows that the majority (75%) of organizations have an even balance between hiring externally and building from within. However, trends to develop employees internally are more prevalent than relying solely on new hires. 

Rewards vs. Costs  

Mercer’s 2010 Attraction and Retention Survey found slightly more than two-thirds (67%) of organizations will be influenced equally by external competitiveness and internal affordability when making pay decisions. However, about one-quarter (24%) of organizations report that affordability will have a greater impact on pay decisions.  

Over the past 18 months, amid limited pay budgets, organizations increased their use of non-cash rewards as a means to enhance employee retention and engagement. Rewards offered more during this time period include communicating the value of total rewards to employees (27%), work-life programs (22%), formalized career paths (21%) and special project opportunities (20%).   

Despite past emphasis on non-cash rewards, for 2010 and beyond organizations plan to focus on money as well as career development to retain and engage the right talent, according to the news release. Leading reward elements perceived to have the strongest impact on employee retention and engagement for 2010 are base salary increases (41%), short- and long-term variable pay (36%), and training and career development (35%).   

Approximately one-quarter of organizations report that programs such as work-life initiatives, employee communication campaigns, and time-off plans – elements of importance during the past year and a half – will have less impact on employee retention and engagement going forward.   

Conducted in April, Mercer’s survey includes responses from more than 320 employers across all industries throughout the US and Canada.