Which compensation strategy might lead to poor employee retention?

Offering below-market salaries as a compensation strategy can significantly lead to poor employee retention. This approach fails to meet the financial expectations of employees who might be aware of compensation standards within their industry or local market. When employees feel they are not compensated fairly for their skills, experience, or contributions compared to peers in similar roles, it can lead to dissatisfaction, decreased morale, and an increased likelihood of turnover.

In competitive job markets, employees have options, and if they see that they could earn more elsewhere, they are likely to leave for better opportunities. This scenario highlights the importance of ensuring that compensation packages are competitive and aligned with market rates to retain talent effectively.

In contrast, strategies such as increasing performance bonuses, conducting reviews based on employee feedback, and providing additional training opportunities can enhance employee satisfaction and engagement. These strategies typically foster a positive work environment and support employee growth, thereby contributing to higher retention rates.