By the numbers: low pay is an acute retention challenge
-About 56% of workers planning to quit their jobs this year cited low pay as the top factor – ResumeBuilder.
-Wage growth has slowed over the past years, with pay increases expected to be at 3.5% in 2025, down from 3.6% in 2024 and 4% in 2023 – Payscale.
-Just two in ten organizations expect a compensation budget higher than last year’s – Payscale.
-Nearly half of U.S. organizations report salary budgets for this year being lower than last year – WTW.
-The overall median pay raise in 2024 fell to 4.1% from 4.5% in 2023 – WTW.
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For workers planning to leave their jobs currently, low pay is the ultimate motivator. It’s a bit of a shift from an initial post-pandemic period when workers reported they’d take a pay cut for more flexibility and remote work options.
Low pay was the top reason cited by workers planning to leave their jobs this year, according to a survey from Resume Builder including responses from over 1,000 workers. The second top factor cited by workers planning to leave their roles was needing better benefits, followed by their current roles being too stressful.
Accordingly, with fewer remote job postings, inflation and rising costs of living, pay is now paramount to staff. But many employers are in a bind as they face economic uncertainty and many aren’t able to give raises to keep top talent.
In Resume Builder’s survey, a large chunk of respondents were younger workers – either in the Gen Z or Millenial age group, said Stacie Haller, chief career advisor at Resume Builder. Many of whom accepted their first or second full-time jobs and then realized the pay simply isn’t enough to support them. That’s leading many younger workers in particular to pick up side hustles or other work to supplement their salaries.
“It’s this whole new, younger group getting into the market thinking, well, I need to make more money now,” Haller said.
The movement toward pay transparency is also changing the landscape, with many employers now posting salary ranges in job postings giving workers more perspective into how much they could be making elsewhere. And salaries are lower today than what was offered during the Great Resignation when the economy was stronger and labor market was much tighter.
“Salaries have now returned to less inflated levels and instead of offering retention bonuses and yearly increases in salary, companies are now transitioning back to pre-pandemic offerings,” said Jenni Kavanagh, vp of Harnham Group, a data talent and recruitment firm.
“As a result, whilst employer offerings may have reduced, the salary expectations of candidates are taking longer to follow suit,” Kavanagh said.
For managers and HR leaders in a bind, there are some incentives other than pay they can provide in hopes it will stem retention challenges. Like flexibility, which also remains important to job seekers and those considering leaving their current roles, said Robin Erickson, vp of human capital at the Conference Board.
Over the past few years many workers have lost the flexibility they had in remote arrangements as they were forced to return to offices, and employers giving more flexibility around working location and hours will have a leg up on those who don’t. And flexibility is something employers may be able to offer even amid other cost-cutting measures.
Other important benefits to staff include more paid time off and other perks targeted toward wellness and better work life balance.
Flexibility is truly crucial to many higher-paid and more experienced workers, said Kyle Samuels, CEO of Creative Talent Endeavors, an executive search firm. He recently had a candidate say they would take a 15% lower salary for a role if they did not have to relocate.
“If you’re 40 years old and you’re an executive at a company making $600,000 a year, you’ve got a nice, beautiful home with equity in it, you can take a little bit of a haircut, perhaps,” Samuels said. “But like we said, if you’re younger and you’re just like, I need to make more money, because I don’t know if I’m ever going to be able to buy a home, the stakes are a little bit different.”
Ultimately, some experts predict the “Big Stay” we are currently in is slowly shifting into a “Great Resignation 2.0” or will, once economic and political conditions stabilize in the U.S.
“I firmly believe that people want the flexibility that they want, and the people who are talented are going to try to find other jobs as soon as they sort of don’t think the world’s going to come crashing down around them,” Erickson said.