Employee retention in 2026: Why pay alone won’t keep your people

When 29% of employees indicate they are likely to look elsewhere, that doesn’t just represent a routine turnover. It signals rising mobility and increased pressure on retention strategies. 

Employees who feel undervalued are significantly more likely to leave. That connection highlights a critical truth: employee retention is closely tied to employee value. 

• 29% of Australian employees are likely to seek new employment in 2026
• 40% of employees who feel undervalued are likely to leave
• 61% say feeling undervalued increases stress and harms wellbeing 

Source: Perkonomics Report 2026

Retention rarely collapses overnight. It’s a longterm transition that gradually weakens as belief and recognition decline. 

Global research supports this pattern. Gallup continues to show that disengaged employees are more likely to change jobs while McKinsey’s workforce studies highlight appreciation, belonging and flexibility as key drivers of voluntary turnover. 

For Australian organisations, the message is clear: improving employee retention requires more than competitive pay. 

While competitive pay allows organisations to compete in the talent market, it does not guarantee commitment. 

The Perkonomics data shows that employees rank trust and autonomy as the strongest drivers of feeling valued at work, with 43% identifying this as critical. Flexible working arrangements follow at 37%, alongside supportive team culture at 33%. 

Employers, by contrast, place greater emphasis on career development opportunities. 

This difference reveals something important for any employee retention strategy. Employees focus on their daily experience of work. They want to feel trusted, want flexibility to be genuine and want recognition that reflects real contribution. 

These factors influence employee engagement and retention more consistently than salary adjustments alone. 

Deloitte’s Human Capital research similarly highlights trust and belonging as core drivers of performance and retention while The World Economic Forum has also pointed to holistic employee support as a competitive advantage in evolving labour markets. 

Salary attracts talent but it’s the employee experience that sustains it. 

Employee retention is not just a workforce planning issue. It can also be a wellbeing issue. 

According to the Perkonomics findings, 61% of employees say feeling undervalued leads to higher stress and poorer mental wellbeing – and alarmingly, only 42% of employers recognise that connection. 

When employees experience ongoing stress linked to feeling undervalued, the impact shows up in productivity, engagement and absenteeism before it shows up in turnover data. 

Safe Work Australia reports that psychological injury claims continue to rise and often result in longer time away from work than physical injuries. This adds both financial and cultural strain to organisations. 

A strong employee retention strategy must therefore address employee wellbeing alongside remuneration. 

Financial wellbeing support is a growing priority for Australian employees. Thirty-four percent identify it as a key driver of feeling valued, rising to 52% among Gen Z employees. 

In many organisations, large salary increases are not always sustainable. However, financial wellbeing initiatives, accessible benefits and meaningful everyday savings can strengthen perceived value without placing unsustainable pressure on payroll budgets. 

When financial support is visible, practical and easy to access, employees are more likely to experience it as genuine care rather than a line item in a policy document. 

This approach complements competitive pay rather than replacing it. 

One of the most telling findings in the Perkonomics research is the gap between employer perception and employee experience. 

While 88% of employers believe their benefits package makes employees feel valued, only 60% of employees agree. This suggests that knowing what matters is not the same as delivering it effectively. 

Fragmented systems, inconsistent communication and inaccessible support weaken perceived value. When employee benefits, recognition and wellbeing initiatives are difficult to find or use, they do not meaningfully contribute to retention. 

Organisations with strong retention typically simplify delivery of benefits by making value visible, ensuring support is easy to access and reinforcing usage consistently rather than occasionally. 

Employee retention improves when value becomes part of everyday work, not an annual review cycle.