What causes wage drift in companies?

Several factors contribute to wage drift, including incentive pay, overtime pay, informal pay adjustments, bonuses, shift differentials, and premium pay for working holidays or weekends. Employers may increase compensation in response to labor market pressures to keep valuable employees.

Does wage drift affect employee retention?

Wage drift can have positive or negative consequences. Higher pay may boost staff retention and morale, but if the wage drift is a sign of inconsistent or unfair compensation, it can cause frustration and resignations. Significant wage drift makes it more challenging for businesses to budget, which can impact cash flow and employee retention.

What can employers do to prevent wage drift?

Businesses can reduce unexpected labor costs by setting clear overtime rules and monitoring hours worked. Regular pay reviews, efficient performance management systems, and transparent bonus criteria decrease wage drift. Tools such as payroll software can help identify wage variations and trends, guiding informed decisions.