Staff retention is a significant issue in New Zealand. On average, Kiwi businesses saw 21.4% of their workers leave in 2023, and this annual turnover rate has been steadily rising for a decade, from a low of 16.3% in 2014.
Losing talent is a surprisingly expensive affair. According to a HR Industry Benchmark Report, in 2022 it took an average of 40 days for an NZ business to fill an open position, and the average cost to hire a new recruit was $23,860 once all the expenses, time and effort were taken into account.
Why do people work? The obvious answer: to get paid.
Who do people quit their jobs? If pay is the reason people work, it makes sense that issues with compensation will form a key driver of staff turnover too.
It's true that salary and bonuses will often influence a staff member's decision to leave. But it's rarely the only factor, or indeed the main one.
In fact, often pay isn't a factor in the decision to quit at all.
In this guide we'll take a deep dive into how much of a role remuneration plays in getting your best employees to stay, and the other common reasons that a worker might seek opportunities elsewhere.
The case for pay as an employee retention lever
There's no doubt that pay is key to retaining your best team members. When an organisation doesn't offer its best workers appropriate financial reward, that talent will naturally look for an employer that does.
Pay is all the more important as the cost of living gradually rises, and with employee loyalty not at the same level as it has been in the past.
If compensation doesn't align with employee expectations, it can quickly transform into a turnover issue. 57% of employees who didn't receive a pay rise this year are now actively looking for a new job, for example, and the figure actually increases to 65% for employees who received a lower-than-expected increase.
So it seems simple: offer appropriate financial reward to your best workers and they'll hang around, right?
No, not necessarily.
Beyond the paycheque: what else keeps people?
A 2025 Randstad survey asked Kiwi workers what they look for in an ideal employer. Perhaps surprisingly, pay was only the second most important factor:
Work-life balance
Attractive salary & benefits
Good training and development
Pleasant work atmosphere
Job security
Modern workers seek more than just money from their work. They look for meaning, connection, respect and opportunities to grow.
During the week, employees spend half their waking lives within the four walls of the workplace, and most will spend around 50 years gainfully employed. That's a whole lot of time to waste in a less-than-ideal situation.
It makes sense then that pay is just one of the things that NZ workers look for in a role. Just as important are a positive and supportive culture, opportunities to develop professionally, and recognition for hard work.
Get these elements right, and you'll not only enjoy the long-term commitment of your best workers, but attract more top talent too.
Employee benefits that improve retention
Let's dig a little deeper. Beyond fair pay, how can an employer create a work environment that keeps its best staff around?
There are a range of non-financial employee benefits that can lead to greater job satisfaction and higher retention rates, including:
Job flexibility: Covid revealed just how flexible some roles can be. If a worker can maintain productivity while working remotely, or choosing their own hours, you should offer it to them. Flexibility is perhaps the most powerful tool at an employer's disposal, both in terms of retention and recruitment.
Generous leave: Modern workers look for understanding from their employers. By offering leave that extends beyond your legal obligations - extended parental leave, bereavement leave, personal days - you show your workers that you care about them.
Employee assistance programs: EAPs show you care by offering employees confidential counselling, wellbeing resources and support services. They are designed to help workers manage whatever issues they may face, whether personal or work-related.
Recognition and rewards: Most workers crave recognition for a job well done. In fact it's hard to overstate what a simple pat on the back or group announcement can do. Successful employers establish structured programs that ensure great work is recognised and rewarded, like those we offer at 1Team.
What do these retention strategies look like in the real world?
In 2006, EziBuy, then New Zealand's largest fashion and home catalogue company, worked with the Department of Labour to enhance its employment offering in the hope of retaining more of its top workers.
The company developed a range of new work policies. Flexible start and finish times were implemented. Employees were allowed to use sick leave to look after family members. Shift times were set around the schedules of different groups, such as parents and students. And contact centre staff were allowed to swap shifts.
The pilot program was a huge success, more than meeting its goals of improving recruitment and retention. It also encouraged EziBuy to include work-life balance measures in its performance management program, which helped the company to gain a deeper, more human understanding of its workforce.
Segmenting retention drivers by demographics
Different demographic groups have different needs, wants and expectations from their employers, and taking these considerations into account is key to crafting effective retention strategies.
Highly skilled professionals will naturally command larger salaries, but given these sought after individuals are likely to be paid well wherever they go, they may respond more to non-salary benefits like flexible working arrangements.
Then there are a range of generational differences to consider:
Gen Z: This cohort is new to the labour market and looking for training and career development opportunities. They are potentially studying, so work flexibility could be a plus. Cost of living concerns make pay an important consideration, while the support of an EAP is likely to be appreciated.
Millennials: This group is most likely to be young parents, so may value flexible working arrangements and generous leave policies. They may be ready to transition into more senior positions, so opportunities for upward mobility could be enticing.
Gen X: Into the second half of their working lives, this group may be less concerned with career development, and more interested in comfort and stability. They're typically more financially sound than younger workers, so pay may be less of a concern.
It's important to remember that these are oversimplifications that may not necessarily apply to your team. You should carefully consider what your employees want from their work lives, then craft strategies that reflect their desires.
Building a balanced retention strategy
How exactly do you craft a killer retention strategy? That depends on the realities of your business and your workers, but in general terms, the following steps are a great place to start:
Step 1: Understand your retention situation
Use data to find out how well you're currently retaining and engaging your workers. Key metrics include:
Turnover rates: The percentage of employees who leave (either voluntarily or involuntarily) over a given timeframe.
New hire retention rates: The percentage of new employees who stay beyond a specific period (e.g. four weeks, six months, a year).
Voluntary vs involuntary turnover: How many employees leave by choice versus those who are dismissed.
Average tenure: The average length of time an employee stays with your company.
Employee engagement score: How engaged, motivated and satisfied your employees feel with their current work situation.
These numbers will then form the baseline that you can work to improve.
Step 2: Find out what your workers want
What's the best way to find out how to keep top talent around? Just ask them. Use meetings or anonymous surveys to understand the things that your team members value the most. Conduct exit interviews with people who have chosen to leave, to find out the reasons behind these decisions.
Step 3: Develop retention strategies
Now that you've armed yourself with the necessary knowledge, use it to craft strategies that encourage your best workers to hang around. These could include:
Regularly recognising and rewarding great work
Offering raises and more competitive salaries that better reflect worker contributions and the realities of the job market
Granting workers flexibility in terms of where and when they do their work
Strengthening your onboarding and training processes
Offering career development and internal promotion opportunities
Building an open, honest, supportive and collaborative organisational culture
Investing in manager training to create better leaders
Involve both your team members and your leaders in strategy development, so everyone feels as though they have a stake in the success of your retention programs.
Step 4: Implement and analyse
Strategies developed, you now need to carefully implement them. Your workers should be fully aware of what the strategies are, how they work, and how they can be capitalised upon, so clear communication is critical. If no one is capitalising on your offerings, they either aren't aware of them, don't know how, or aren't interested. In each case, you should reconsider the whats and hows of your strategy.
Step 5: Optimise your strategies
In the longer term you should analyse the effect of a strategy on the retention KPIs listed above, particularly turnover rate. You can then use this feedback to tweak and optimise the strategies into the future, to make them increasingly effective at keeping your best workers around.
Remember that some level of staff turnover is natural, indeed healthy, for an organisation. The main thing that you want to minimise is top talent leaving voluntarily.
Final thoughts: shifting the conversation beyond pay
It's not all about the money. In fact, pay often isn't even the primary concern for top talent. Smart employers instead target the elements of the workplace experience that make team members feel seen, heard and valued.
Effective retention strategies come in many shapes and forms. But one of the simplest and most effective is recognising and rewarding your best workers.
At 1Team we specialise in helping New Zealand businesses grant high performing team members access to a range of perks, such as savings from New Zealand's leading retailers (Torpedo7, Dulux, Pita Pit, Hirepool, Repco, Warehouse Stationery), all delivered through an app with your branding.
In the process we give your best workers yet another compelling reason to stay.
If you're ready to retain more top talent, get started with 1Team today.
