Why pay isn’t the reason people quit (most of the time)

When someone resigns, pay is often blamed, but the reality is more complex, as salary is rarely the primary reason people leave.

Research shows that culture, growth opportunities, and the quality of management are consistently stronger drivers of retention than pay. 

Of course money matters, especially when it feels unfair, but most employees stay or go because of how their work makes them feel, not the number on their payslip.

In this article, we’ll challenge the myth that compensation is king, explore when pay does become a dealbreaker, and share practical steps for leaders who want to keep their best people loyal for the long haul.

The myth of money as the main motivator

For decades, conventional wisdom has said people leave for better pay. It’s simple, measurable, and easy for managers to rationalise. But the evidence tells another story.

Gallup’s global workplace study found that employees who strongly agree they feel connected to their company’s mission are 27% more likely to stay, regardless of pay levels. Culture, not cash, is the glue that holds teams together.

MIT Sloan research also found that a toxic corporate culture is 10 times more predictive of attrition than compensation. 

The same study found that non-monetary methods are more likely to drive retention. For example, offering lateral job opportunities is 2.5 times more predictive of retention than compensation.

Salary is rarely the spark for resignation, but it is often the excuse. The real issue usually lies in culture, career stagnation, or poor leadership.

What really drives retention

So if money isn’t the main reason, what is? Three factors come up consistently in research and case studies:

1. Culture
   
   People stay where they feel a sense of belonging and alignment with values. Culture shapes day-to-day experience far more than pay packets. When employees trust leadership and feel respected, they’re more willing to weather pay frustrations.
   
   
2. Growth opportunities
   
   Lack of progression is a major reason people quit. LinkedIn’s Workplace Learning Report found that 94% of employees would stay longer at a company that invests in their career development.
   
   
3. Manager relationships
   
   The old saying holds true: people leave managers, not companies. A bad boss is more powerful than a big pay rise elsewhere.

Employees stay where they feel valued, supported, and where the work is challenging. If you get culture, growth, and leadership right, salary is no longer the main driver of retention.

When pay becomes a dealbreaker

Money does matter in terms of retention, and it becomes a key factor in specific circumstances:

• Inequity. If employees find out a peer earns significantly more for the same role, trust collapses. Pay inequity is one of the fastest ways to spark resignations.
  
  
• Poor progression. Stagnant roles combined with flat pay send a clear signal that growth isn’t valued.
  
  
• Economic pressure. In times of high inflation or rising living costs, pay becomes a practical necessity, not just a motivator.

For example, as inflation surged in 2022, a UK CIPD survey found that 37% of employees who quit cited pay as a factor, up from 26% the previous year. 

Economic context can turn pay from a hygiene factor into a dealbreaker.

Pay doesn’t usually drive attrition, but when it feels unfair, stagnant, or insufficient in real-world terms, it can become the final straw.

Case studies: retention beyond compensation

Plenty of companies prove that retention isn’t just about money. The ones with the strongest loyalty have built cultures where people feel trusted, supported, and invested in something bigger than their pay packet. 

Here are some examples from different industries showing how it’s done.

Netflix: freedom and responsibility

Netflix gives employees high autonomy, minimal bureaucracy, and equity to reward impact. 

Its famous ‘freedom and responsibility’ culture shows that trust, not pay alone, keeps top talent.

Atlassian: career mobility

Atlassian’s Career Maps and internal mobility programme give employees clear paths and lateral moves across teams, keeping them engaged and growing.

John Lewis Partnership: ownership as retention

Every employee is a partner, sharing directly in profits. This ownership model fosters loyalty and pride, helping John Lewis maintain stronger retention than competitors.

The most loyal teams are built on trust, growth, fairness, and ownership, not just bigger salaries.

Practical steps for leaders

So what should leaders do if they want people to stay for more than a salary? Here are five practical steps:

1. Invest in career paths. Create visible progression opportunities and invest in learning. Don’t wait until people stagnate.
   
   
2. Train managers. Equip leaders with coaching and feedback skills. A great manager is a retention engine.
   
   
3. Audit pay equity. Ensure salaries are fair internally, even if they’re not always the highest in the market. Perceived unfairness kills trust.
   
   
4. Strengthen culture. Build belonging and alignment with clear values. Toxicity costs more than any pay rise.
   
   
5. Offer ownership. Share schemes align employees with long-term success. Equity creates a sense of impact and fairness beyond cash.

Loyalty isn’t bought with perks or pay hikes. It’s earned through fairness, growth, and belonging.

Summary

Pay matters, but not in the way most leaders think. People don’t usually quit because of money alone. They quit because they feel stuck, undervalued, or disconnected. Salary becomes the convenient reason they give, not the root cause.

The smartest leaders pay close attention to culture, growth, and leadership. 

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At Vestd, we help founders design share schemes that make employees feel truly invested in the company’s future. Book a call today to see how we can help drive retention in your business.