Employee turnover remains one of the most persistent challenges for small and medium-sized enterprises (SMEs) in emerging economies, where wage-setting institutions, inflation dynamics, informality, and skill mismatches interact in complex ways. This article examines how wage policy—understood as the constellation of minimum wage regulation, internal pay structures, performance-based compensation, and wage indexation—shapes turnover in Uzbekistan’s SME sector. Using a conceptual mixed-methods design grounded in human capital, efficiency wage, and behavioral economics perspectives, the study synthesizes secondary sources on Uzbek labor markets and international evidence and develops an analytical model linking wage practices to voluntary and involuntary separations via mediators such as perceived fairness, cost-of-living alignment, and career progression signals. The analysis shows that wage compression across grades, weak differentiation for high-demand skills, and limited linkages between pay and skill development elevate quit rates, particularly among younger and digitally skilled workers. Inflationary episodes, if not accompanied by timely indexation or cost-of-living adjustments, amplify real-wage erosion and accelerate separations. Conversely, transparent pay bands combined with credible performance pay, skill-contingent progression, and benefits that mitigate liquidity constraints reduce turnover by strengthening organizational attachment and improving the employee value proposition. Contextual features of Uzbekistan—rapid structural transformation, uneven productivity across sectors, regional wage disparities, and widespread informal arrangements—moderate these mechanisms. The paper concludes with a policy and management roadmap emphasizing predictable indexation rules, sector-informed pay benchmarking, competency-based salary grids, and complementary non-wage benefits in SMEs. It argues that wage policy, when coherently designed and consistently communicated, can convert compensation from a reactive cost into a strategic instrument for talent retention and productivity growth.  

Wage policy, minimum wage, compensation structure, employee turnover, SMEs

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