Compensation strategies for SME employee retention

Talent is the lifeblood of any organisation, but small and medium enterprises (SMEs) today are struggling to keep vital talent on board. In the wake of the Great Resignation, three in five Singapore SMEs are receiving more resignations from employees this year as compared to 2021. Worryingly, 65% are also struggling to hire replacements.^[1]

These talent challenges are by no means unique to Singapore SMEs. Unlike multinational companies (MNCs) with deeper pockets, many SMEs simply cannot afford to keep talent engaged with attractive compensation and perks.

In its Future Readiness of SMEs report, the World Economic Forum pinpoints talent acquisition and retention as a top challenge for SMEs, with 52.5% of SMEs globally citing this.^[2]  In particular, the report finds that in terms of rewarding employees, SMEs lack the financial means to compete with larger organisations.

It comes as no surprise that an attractive salary and benefits package is top-of-mind for Singapore employees – 70% rank this as important in an ideal employer.^[3]  But as local salaries rise in response to a talent crunch,^[4]  the urgent question is how SMEs can stay competitive in the talent market.

Given that compensation goes beyond money, the answer lies in enhancing benefits that make your employees feel valued. Understanding what benefits your employees value, and tailoring your compensation thoughtfully, can strengthen your compensation package as a whole. Here’s a look at five compensation tactics for SMEs to boost retention.

Improve insurance benefits for employees’ peace of mind

Aside from business insurance to serve as protection for the whole enterprise, an employee insurance coverage is a straightforward, cost-effective way to help them feel cared for – yet SMEs often neglect it.

Six in ten Singapore employees say they would be “more willing” to join an SME that offers medical benefits. A further 40% indicate they would be “more likely” to stay in a workplace with medical benefits, and almost half perceived employers as more caring if they provided such benefits.^[5]  Despite this, around one in eight SME employees currently receive no coverage for medical expenses, and almost two in five SME owners set aside no more than S$10,000 for healthcare coverage.^[6]

If you haven’t invested in healthcare coverage for your talent yet, consider this your cue to take action. To set yourself apart from the competition, it’s worth thinking beyond the standard medical insurance.

For instance, DBS offers an affordable range of insurance solutions for comprehensive business wellness. Group Medical Insurance provides peace of mind for your employees with extensive coverage for hospitalisation, surgery, accidents, and more. Meanwhile, General Insurance safeguards your business and employees’ wellness in unforeseen events like work injuries and personal accidents.

DBS also offers flexible Life Insurance with an Executive Bonus feature, promoting retention for your key employees. Such enhanced insurance benefits signal that you value employees – boosting your business’ attractiveness to talent.

Show care for employees’ holistic well-being

Employee well-being doesn’t stop at physical health. Another compensation strategy that shows care would be benefits that promote your talent’s holistic well-being.

An Indeed survey found that nearly a quarter of Singapore workers planned to leave their jobs in the first half of 2022, with 46% of these citing increased stress.^[7]  Benefits targeting holistic well-being can help your talent cope better with stress and feel more supported at your SME.

As more Singaporeans become aware of the importance of mental health, it’s promising that more employers are stepping up to provide mental health support.^[8]  Compensation-wise, you can consider providing mental health days, mental health insurance, and even Employee Assistance Programmes (EAPs).

One particular stress factor for Singaporeans that employers are well-placed to tackle is financial concerns. Since the pandemic hit, nearly 50% of Singaporeans admit their financial well-being has deteriorated, impacting both their mental and physical health.^[9]  SMEs can stand out from the pack by empowering employees to combat this often-overlooked stressor.

For example, DBS’ Holistic Wellness Toolkit for businesses makes it easy for your talent to pick up financial literacy. Employees can access financial planning classes at DBS NAV University, and manage their finances comprehensively with the DBS NAV Planner. They’ll also get valuable opportunities to consult personally with a dedicated advisor.

Reward your top performers with experiential perks

If your compensation budget doesn’t include rewards for your top performers, you may be unnecessarily losing out on hardworking talent. Research reveals that 44% of employees switch jobs because they feel unrecognised for their efforts.^[10]  While a ‘thank you’ for your talent’s hard work goes a long way, more tangible forms of compensation can make them feel truly appreciated. 

One impactful approach that won’t break the bank is to reward them with lifestyle experiences. Randstad’s Global Workmonitor Survey 2022 shows that employees are increasingly placing priority on personal experiences. In fact, 52% of Singapore respondents say they would quit a job if it prevented them from enjoying their life – higher than the 48% global average.^[11] 

For a start, SMEs can reward employees by increasing their amount of paid leave, enabling them to spend more time enjoying themselves on holiday. This signals to talent that your workplace is supportive of their personal fulfillment. 

To go the extra mile, how about sponsoring their getaway or leisure plans? While this might sound costly, you can look into working with partners to secure cost-effective rewards. DBS’ Holistic Wellness Toolkit for Corporates includes access to the DBS Marketplace, where you can leverage deals and savings across areas like travel and leisure, car, home and living.

Compensate your talent with time

Flexible work arrangements are in the limelight these days, and SMEs can tap into this increasingly popular incentive to boost employee satisfaction.

Today, an overwhelming 80% of Singapore employees say flexibility in working hours is important to them. Flexibility can make or break employee retention – 41% would not accept a job if it didn’t offer flexible working hours, and 27% have already quit a job due to lack of flexibility.^[12] 

Stay responsive to your talent’s expectations by adding flexible working hours to your compensation package. This flexibility can take various forms, depending on your team’s preferences. For instance, 64% of full-time employees in Singapore say they would prefer flexible hours over a four-day work week, but 87% still remain open to a four-day arrangement.^[13] 

The key to effective compensation lies in asking your talent about their preferred choices and working with them to integrate flexibility into their schedules. Tailoring your compensation to their needs will make them feel heard and strengthen their confidence in your company.

Give smaller and more frequent raises

While salary isn’t the be-all-end-all, there’s no question that pay raises ultimately do make a big difference in employee satisfaction. EY’s 2022 Work Reimagined Survey reveals that of the Singapore employees seeking new jobs this year, 45% are motivated by a desire for higher pay.^[14] 

Understandably, SMEs cannot afford to give huge raises or bonuses. What you can consider, instead, is to break down your financial rewards into smaller but more frequent increments across the year. 

In today’s fast-changing market, Singapore employees are job-hopping more frequently and are more open to seizing better job opportunities as and when they present themselves.^[15]  By strategically giving raises at shorter intervals, you can give your talent a better sense of career progression and keep them continually engaged.

While investing in higher wages can be a struggle for SMEs, it ultimately pays to do so. When replacing an employee, training expenses and lost productivity can cost you up to 33% of your new hire’s salary.^[16] 

Staying competitive in the war for talent

While SMEs may not have the deep pockets of larger enterprises, that doesn’t mean you need to lose out in the war for talent. Crafting a thoughtful and tailored compensation package can bolster your ability to win – and keep – the right talent.

At DBS, we are committed to helping SMEs thrive in a highly competitive landscape. Through innovative solutions like our curated workplace wellness toolkit and our insurance solutions for businesses, we are here to help you build a more comprehensive compensation strategy for the future.

[1] HumanResourcesOnline, The Great Resignation: How the global phenomenon is hitting Singapore’s SMEs hard, April 2022

[2] World Economic Forum, Future Readiness of SMEs: Mobilizing the SME Sector to Drive Widespread Sustainability and Prosperity, November 2021

[3] Randstad, 2022 Employer Brand Research, June 2022

[4] SMEhorizon, Salaries of talent in Singapore rise, September 2022

[5] HumanResourcesOnline, 90% of employees polled in Singapore's SMEs want more medical and employee benefits, April 2022

[6] The Straits Times, Employees say medical benefits big pull factor in joining SMEs: Prudential survey, April 2022

[7] TODAY, Nearly a quarter of S'pore workers intend to quit their jobs in first half of 2022: Survey, December 2021

[8] Cigna, Be there when it matters: navigating employees' mental health, November 2021

[9] TODAY, Nearly 1 in 2 Singaporeans have seen a deterioration in their financial wellbeing since Covid-19 hit: Prudential Survey, September 2021

[10] Unily, How to boost employee retention with rewards and recognition gamification, April 2022

[11] Randstad, Global Workmonitor Survey 2022

[12] Randstad, Global Workmonitor Survey 2022

[13] Singapore Business Review, Two-thirds of employees prefer flexibility over a 4-day work week, June 2022

[14] EY, Employee influence in Singapore grows: 51% set to quit jobs for better pay, career opportunities and flexibility, July 2022

[15] The Straits Times, S'pore employers' attitudes to job hoppers changing amid rising trend, June 2022

[16] HRM Asia, The true, crippling costs of employee turnover, September 2018