Dive Brief:
- More than 4 in 10 workers believe they are more likely to get a raise by leaving and then rejoining their company than by staying, according to a report from professional services company Marsh. That compares to 18% who said the same in 2024.
- This “rampant pay cynicism” is not only a threat to retention, the report found. Ninety-two percent of investors said they would “reduce or eliminate investment in firms with employee pay issues.”
- Paired with a “depleted and disengaged” workforce, “this trend is systematically undermining trust in reward systems,” Marsh said.
Dive Insight:
“We are seeing a breakdown in the contract between employers and employees,” Gordon Frost, global rewards leader at Marsh, said in a statement. “A depleted workforce paired with cynicism about pay creates a precarious moment for employers.”
Improving pay transparency and skills-based rewards can have a profound impact on employee morale, Marsh found. Workers who said they feel they’re being fairly compensated report being 85% more engaged and 60% more committed.
Yet, while nearly three-quarters of HR leaders said that skills-based pay drives retention, only 26% have actually implemented it and just 31% of employees said they believed they would be compensated for upskilling.
“Employees are exhausted, they don’t believe the system is fair, and the moment the job market improves, they will leave,” Frost said. “Organizations should rebuild trust through transparency, modernize how they think about pay and skills, and give employees real reasons to believe their compensation reflects their value and their futures.”
To solve these problems, the study suggested auditing job architectures, creating clear paths for skills-based pay, ensuring pay transparency to avoid employee cynicism and restructuring management responsibilities to focus on development instead of administrative tasks.
The study uncovered “a widening gap between executives’ expectations for talent strategy and HR teams’ legacy approaches” and said that this divide can create consequences for organizational retention, performance and agility.
“Traditional approaches to job architecture, compensation, and performance management are no longer fit for purpose in a business environment transformed by AI, skills volatility, and workforce depletion,” the report said.