A combination of monetary and non-monetary rewards has the potential to further reduce attrition levels
Numerous research studies have established how rewards can impact the motivation level of employees. Studies have also confirmed that rewarding and recognizing employees enhances their productivity level which further benefits the organization. Alternatively, if companies fail to recognize their people, it can result in high turnover. Advantage Clubs new study on R&R Trends India Report 2023, Impact of R&R on Attrition further confirms that Rewards & Recognition (R&R) have a strong correlation with the level of attrition in an organization.
The study analyzed the impact of R&R on attrition in four different cohorts of employees. The first group consisted of those who received monetary rewards. The second group consisted of those who received non-monetary rewards. The third group consisted of those who received both types of rewards. And the fourth group consisted of those who received none at all. The rewarding behavior of more than one million employees in 100 companies covering different sectors was analysed. It was observed that the level of attrition in employees who received no award in 2022 stood at 38%. While the average attrition level in employees who received some kind of reward was found to be only 9%.
Advantage Club’s study has analyzed rewarding behavior in companies that have a robust R&R strategy and studied how these companies have managed to control their attrition levels.
The challenge of attrition is real in India. As per the report, the average attrition level in Indian corporate stands at 16%. But there are some industries that have an attrition level of more than 30%, which is relatively high as per the average industry levels. The highest level of attrition is in the Business Process Outsourcing (BPO) sector at 40%. The lowest was in the logistics sector at 4%. Also, capital-intensive sectors such as manufacturing and FMCG have a much lower attrition rate as compared to people-intensive sectors such as IT services and technology. Sectors such as agriculture and chemicals, automotive, and FMCG have an attrition rate of less than 10%. And sectors like IT services, retail, consulting, and BPO have an attrition level of more than the average overall attrition level.
Such increasing attrition levels have compelled companies to invest more in employee engagement activities. India’s leading automobile company saw an increase of 25% in their employee engagement budget in 2022 while a fintech startup also witnessed a similar trend. As per Advantage Club’s report, companies allocate about 2-5% of their total payroll budget to employee engagement.
The impact of R&R on the attrition level of employees was analysed. It comes to light that monetary rewards have a greater impact as compared to monetary rewards. Employees who received monetary rewards had an attrition level of 5%. And employees who received non-monetary rewards witnessed an attrition of 11%. As compared to people who did not receive any reward, monetary rewards can reduce attrition by 87%.
Looking at this trend, it is understandable why employers prefer rewarding employees in monetary terms. The study reveals that more than half i.e. 52% of employees in India, get rewards through monetary rewards while only 24% through non-monetary rewards.
Further, in some industries, there was a drop in attrition among employees who receive both monetary and non-monetary rewards. In the BPO sector, attrition among employees who received monetary rewards was at 16%. But when employees received both rewards together, the attrition level further dropped to 10% which is a 38% reduction. Similarly, in the IT-Services, Pharma, and Retail sectors, there is a reduction of 10% to 30% when an employee receives monetary and non-monetary rewards together.
It is well-known that when it comes to retaining good talent, monetary rewards have a much better impact as compared to non-monetary rewards. But there is no harm in using a combination of monetary and non-monetary rewards as a part of the rewarding strategy. On the contrary, the results proved to be much better later. Looking at the above findings and trends, HR leaders and professionals can take valuable insights and formulate their R&R strategy accordingly for this year.
Suggested Read: Employee Recognition: A Complete Guide
Advantage Club is a global employee engagement platform. It offbenefits like perks, rewards, recognitions, and flexible benefits on a single platform. It provides end-to-end solutions to facilitate employee engagement. Through exclusive privileges and rewards by brand partners, allowing them to reach out to targeted customer segments. Established in 2016, Advantage Club is a brainchild of UCLA postgraduates Sourabh Deorah and Smiti Bhatt Deorah. They identified employee benefits as a space to create disruption using data mining and analytics. Currently headquartered in San Francisco, Advantage Club has an impressive client portfolio featuring Concentrix, Teleperformance, Hexaware, EY, Target, Accenture, BCG, Lafarge, Resort World Sentosa and many more.