In a talent scarce and skills based economy, retaining top talent has never been more critical. Many companies struggle with high turnover especially amongst their most skilled and high performing employees.
Companies talk about top talent, high performers but its more words than action.
One of the biggest culprit in our experience how companies manage compensation for their “top talent” vs the rate at which pay must be maintained to ensure market competitiveness.
Understanding the Compensation Gap
The chart is based on actual numbers. The multipliers reflect the pay gap between Grade A and Grade B in actual $ terms. Grade A is entry level role and Grade B is a functional head role. In China a multiplier of 8 means that from an entry level role to a head role your pay increases 8 times. If we assume that a top talent in China takes 15 years to get to a functional head role, pay must increase 800% in 15 years. Multipliers for other developed markets are lower given pay is compressed.
Historically, China has a range of 6-10 % annual increase. If you go by annual increases and promotion increases, it fails to keep up with the increases you need to give top talent / top performers .
Some reasons why companies fail
Market rate for skilled professionals can skyrocket far beyond general inflation rates. Specialized skills in high demand see huge premiums
Employees who rapidly advance in their skills and responsibilities outpace standard pay trajectory. When their pay does not reflect market value, it can lead to dissatisfaction and turnover
Lack of proper reward differentiation means top performers barely get the increases that match their level of impact and performance.
When top talent perceive that their pay does not align with market, it leads to
- Decreased Motivation
- Increased Openness to Opportunities
- Poor perception of what existing companies does
