Redefine Pay Now or Risk "a Much Broader Retention Issue"

Why It Matters

A misaligned view of compensation threatens talent retention and escalates turnover costs, forcing firms to act before the gap widens further.

Key Takeaways

• 81% employees say pay lags cost of living
• 85% employers believe salaries are keeping pace
• Only 73% of firms plan raises this year
• Perception gap fuels potential retention crisis
• Salary reviews critical as markets recover

Pulse Analysis

The latest Robert Walters Salary Guide highlights a stark divergence between employee sentiment and employer confidence on compensation. While a majority of workers—81%—report that their pay does not keep up with inflation, a similarly high proportion of CEOs—85%—believe salaries are on target. This mismatch is not merely a perception issue; it reflects deeper data gaps in how organisations benchmark pay against market trends, especially as cost‑of‑living pressures intensify across regions.

Employers’ optimism about salary adequacy masks a looming retention risk. Studies consistently show that perceived underpayment drives voluntary turnover, which can cost firms up to 150% of an employee’s annual salary. With only 73% of organisations planning raises this year, many risk losing high‑performers to competitors who act more aggressively on compensation. The financial impact of churn—lost productivity, recruitment expenses, and knowledge drain—can outweigh the modest cost of targeted salary adjustments, especially in talent‑tight sectors.

To bridge the gap, companies should adopt a data‑driven remuneration strategy that blends market benchmarking with internal equity analyses. Regular salary audits, transparent communication about pay structures, and flexible benefits can realign expectations. As economies emerge from restructuring phases, timing salary reviews to coincide with recovery milestones can reinforce employee value perception and safeguard talent pipelines. Proactive pay management thus becomes a strategic lever for sustaining growth and competitive advantage.