Performance-Based Pay: The Secret to Retaining Talent

In a competitive labor market to attract and retain employees, many businesses choose a high salary policy as a "trump card". However, is this really an effective and sustainable solution? Faro Vietnam will give you a different perspective, analyze the pros and cons of paying high salaries, and propose other important factors that contribute to retaining talent for businesses.

1. Benefits of paying high salaries

High salaries act as a magnet to attract potential candidates, retain employees and help businesses compete with other competitors in the labor market. When paid appropriately for their abilities and contributions, employees will feel respected, thereby being motivated to work effectively and stay with the company for a long time. Furthermore, paying high salaries also contributes to building a prestigious image, attracting customers, partners and investors.

For employees, high salaries help improve the quality of life, bring a sense of respect, motivate effective work and reduce financial worries. From there, they can focus on dedicating themselves to the company and developing themselves.

Is paying high salaries a solution to retain good employees?

2. Paying high salaries is not the "ultimate weapon" to retain employees

2.1 "Salary race" causes financial pressure

Continuously increasing salaries to attract and retain employees can lead to an endless "salary race", causing many negative consequences for businesses. Heavy financial pressure affects the profits and competitiveness of businesses.

In addition, it also causes a mentality of comparison and dissatisfaction among employees, affecting the overall spirit and work efficiency. Difficulty in controlling personnel costs, leading to a lack of resources for other business activities

2.2 Dissatisfaction and internal comparison

Paying high salaries can attract employees but also has many potential risks leading to dissatisfaction and internal comparison within the business.

First, high salaries can attract employees who are only interested in immediate benefits, lacking commitment and long-term commitment to the company. They may value salary more than the value of work and corporate culture, leading to "job hopping" when there is an opportunity to receive a higher salary.

Second, a working environment with high salaries can become fiercely competitive, lacking cooperation and mutual support among members. Each individual focuses on personal goals, emphasizing personal achievements, leading to a lack of team spirit and affecting the overall efficiency of the group.

Third, the most serious consequence is the “brain drain” when talented employees are easily attracted by higher salaries from other companies. This directly affects the competitiveness and long-term development of the business.

Moreover, the large income gap between positions and departments can lead to comparison and dissatisfaction among employees. Those with lower salaries may feel disappointed, lack motivation to work and affect the overall spirit of the company.

Therefore, building a reasonable, fair and merit-based salary and bonus system is extremely important. Businesses need to create a cultural working environment, promote team spirit, and create development opportunities for employees to attract and retain talent for the long term.

Reasons why businesses cannot retain employees for a long time

2.3 Consequences of unsustainable employee retention

Strategies of retaining employees based solely on high salaries do not bring sustainable results in the long run. When the labor market is constantly fluctuating, the attraction of high salaries will gradually decrease, no longer enough to retain talent. Employees may lose motivation to work if they only focus on money, leading to a decrease in work performance.

Therefore, businesses need to build a cohesive and attractive working environment by investing in non-wage factors such as development opportunities, positive corporate culture, and recognition of employee contributions. This not only helps retain talent but also motivates them to devote themselves, contributing to the sustainable development of the business.

2.4 Causes a "dependent" mentality and lack of motivation

If employees only focus on high salaries without paying attention to other factors such as working environment, opportunities for personal development, etc., they can gradually form a "dependent" mentality and lack of motivation to improve themselves and contribute to the company.

In addition, the lack of motivation of employees can lead to work stagnation, reducing productivity and overall efficiency of the group. Enterprises need to have policies to encourage and motivate employees to continuously learn, develop and contribute

Paying high salaries is an important factor in attracting and retaining talent, but it is not the only decisive factor. Enterprises need to build a comprehensive strategy, harmoniously combining high salaries with other factors such as working environment, corporate culture, personal development opportunities, etc. to create an ideal working environment and retain employees for the long term. Remember, the most effective "weapon" to retain talent is not simply high salaries, but understanding, respecting and investing in the development of each individual in the group.

Besides the above strategies, you can choose Faro Vietnam, here we provide solutions to support the management of enterprise, including: payroll service, recruitment service, and other HR related service.

>>>Read more: Top labor outsourcing companies in Vietnam

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