Money for Nothing? Companies Cannot Just Rely on Higher Pay to Secure Loyalty

Companies cannot just rely on higher pay to produce employee loyalty as there is little evidence to suggest that countries with high real-wage growth are able to use that to secure higher levels of worker retention.

According to research from professional services firm Towers Watson, employers need to take a broader view of the employee experience beyond pay if they are to retain talented employees in a competitive marketplace.

The study found that in Western Europe last year the highest levels of employee attrition occurred in Switzerland, the UK and Sweden.

These countries also enjoyed amongst the highest GDP growth in the region, between 0.8% and 1.9%, revealing a correlation between GDP growth and employee attrition.

"It's quite common to see people moving jobs more often in countries with healthy economic conditions as there are likely to be new jobs available in these places and people have more confidence in their job security when moving between jobs," said Carole Hathaway, director of Towers Watson's rewards practice in EMEA.

She added: "The economic conditions in a country can create either an 'employees' market' with lots of jobs and a limited talent pool, or an 'employers' market' with fewer job opportunities and lots of competition for each role."

In contrast, countries such as Spain, Portugal and Italy which suffered a decline in GDP levels in 2013, also had the lowest levels of employee attrition in Western Europe.

These trends were also seen in other regions such as Central and Eastern Europe, the Middle East and Africa, where the majority of countries with high GDP growth also recorded high levels of employee attrition.

But there was no correlation found between employee attrition and real-wage increases across the region.

For example, the UK, the Netherlands and Spain all experienced low wage growth but had very different levels of employee attrition amongst professional level employees.

Similarly Switzerland, Sweden, Italy and Portugal all enjoyed relatively high wage growth but had very mixed levels of professional level employee attrition as a percentage of overall headcount.