Retaining Freshers: How Our Salary Strategy Reduced Attrition and Boosted Loyalty

Hi CiteHR,

I had faced the problem of retaining freshers in my company. Initially, we tried to get a bond signed from them, but it really did not work. Good candidates used to back out at the very mention of the word "bond."

So I thought for a while and suggested to my management to raise the salary package of the freshers by 30-50% than the normal standard industry level. We decided to retain 25% of the emoluments as a deposit and keep such an amount very religiously in a fixed deposit of a bank. We would return the amount to employees after a period of one year with interest (same as the bank would give). The amount forfeited if an employee leaves before completion of one year is to be utilized for the welfare of the on-roll employees.

(Here I must tell you that we are a small company, and our training for the freshers is specialized. The trainers come from the US to train them.)

By implementing this strategy, we achieved the following advantages:

1. As we were paying more to the freshers than any other company, we could hire the best candidates.
2. We saved on attrition costs in terms of money, energy, time, etc.
3. The cost of the employee is too high compared to his experience, making it difficult for other companies to hire him.
4. Employees trust the management and are assured they will get their deposit back with interest after completing one year.
5. Employees are convinced that the management pays them more and retains the extra part of remuneration.

After successfully implementing this strategy, we have started applying the same logic to confirmed employees. Even to these employees, we have given a 40% increment compared to our normal increment of 15-20% every year.

The 40% increment is divided as follows:

- 50%: direct raise in salary
- 30%: based on monthly performance to be paid the next month
- 20%: to be retained and paid after six months along with interest (initially for one year)

This way, we will always have a sizable amount with the company for six months, making employees think twice before resigning. It has stopped employees from changing jobs for small increments.

We have ensured that other companies will not be able to hire our employees easily due to their high cost. Additionally, we provide all possible facilities to employees. We conducted an employee satisfaction survey, and all employees are satisfied with the culture, facilities, and future plans.

The formula based on increment applies only to employees with outstanding performance, which is a matter of pride for those under this scheme. The rest of the employees are looking forward to it.

Please let me know your comments.

Regards,

KAVITA

Hi Kavita,

A very nice solution to the most common problem faced by companies. I take pleasure in thanking you. You did a great job. As mentioned by Vinod, it was really out of the box thinking, very innovative.

Regards,
Shyamali

Is the salary the only criteria for the attrition rate? Have you taken any steps to address other areas such as safety aspects, workload, peer-subordinate-boss relationships, markets, and communication channels? Providing a higher salary without support in the aforementioned areas and without demonstrating a growth path may not be enough to retain employees for an extended period.

Hi Kavita,

It is a good idea. You can start this way and then need to take care of other aspects, which will really make an employee stick to an organization.

On the contrary, this will have some negative aspects. Assume that employee X enjoys a very good salary at your company and opts to leave after the stipulated period for some other reason. His/her mindset will look for a similar salary package - which he/she will not get elsewhere - then the employee will either be jobless for some time or will be forced to take a job at a lesser salary (compared to what you were paying). This could ruin their career unless they have a higher level of attitude and mindset to accept reality.

This is just for your information as well as to get feedback from other members.

Regards,
Rajacsn
HR Consultant.

Hi Kavita,

Can you please help me understand about the "retaining of 25% of the emoluments as a deposit" and keeping such an amount very diligently in a fixed deposit account at a bank?

Thanks,
Rekha Roy

Hi Kavita & Friends,

Indeed, I am also in the same boat that we have a manpower of around 5000 employees alone in Coimbatore. A year ago, our operator level salary was Rs 1250/-, as we don't come under minimum wages, we were allowed to pay this salary. Due to attrition and the flow of manpower, we revised the salary to Rs 2500/- as a jump - a good hike, resulting in a good flow of nearly 1500 new recruits. However, after one year, there are only 700 employees recruited last year.

Friends, not only because of compensation, recruitment, and retention can be made successful. There are other reasons. If any of you could kindly suggest a few other things/schemes that can help us in recruitment and retention.

Awaiting your valuable suggestions.

Regards,
Pradeepa

Hello Kavitha and all others.

Sure, this is a novel idea. Very encouraging and praiseworthy.

Certainly works in some organizations.

This will surely address an issue based on Monetary Benefits and for whom money is alone important.

What about other aspects? After one year or two, you can't call them freshers. But no doubt you need to motivate them to stick to your company.

That is where other aspects come into the picture. The probable solutions that may include are paying for higher education by the company (particularly through Distance Education Programs), knowledge management, making one of the primary requirements for a subsequent position elevation to be based on skill-knowledge/aptitude tests. When you include every promotion based on some test and on acquiring relevant higher qualifications, this will not cause dissatisfaction among other senior personnel (remember, his pay pocket is not hampering) and your so-called freshers remain freshers for years to come.

Any comments, suggestions, and deliberations are highly appreciated, please.

Venkat [Login to view]

Hi Kavita,

That's good. Even we had implemented such kind of strategy in the Procurement Department in my first company because the pressure was too much. However, they could not be retained for more than one and a half years as they got disinterested and left.

We need to consider long-term retention for entry-level positions because we invest a lot in training them. Additionally, the company should have enough funds to pay above industry standards.

Nevertheless, it's great to see that the strategy you mentioned is working well in your organization. Keep it up.

Hi Pradeepa,

I have a suggestion. First, find out why people are leaving and what is making them dissatisfied about their job by conducting exit interviews. Find out what the majority of people feel before quitting the job. Money may be a constraint, but there are other constraints too, like the work culture. I am just giving you an example; find out why they are dissatisfied. There may be reasons behind it. Once you find out the reasons, we can discuss the right move.

Regards,
AJITHAA HASAN

Hi Kavitha,

It's good to see you thinking differently. Congratulations on your effort. I have a suggestion - if we want to retain an employee, we have to ensure their satisfaction with both monetary and non-monetary benefits. A satisfied employee yields high productivity. What you have done on the monetary side is commendable. At the same time, consider providing Sodexo coupons and offering two weeks or a week of yearly vacation to promote work-life balance for the employees. This approach will encourage new hires to stay with the company and reduce turnover. By showing genuine interest in them, employees will be more loyal and think twice or even thrice before resigning. You are doing a great job, keep it up. All the best.

Regards, AJITHAA HASAN