There's more to managing and retaining good employees than purely financial rewards.
Being an ex-army staff sergeant, I was lucky in that my organisation sent me on many courses aimed at learning leadership and management. They say the armed forces in one of the few organisations that is able to take the time to send even junior managers (junior NCOs) or leadership courses.
It's such a huge subject I would recommend you read a couple of books on the subject.
As a starter though:
You need to know your staff and find out what motivates them. Start each employee with a good, in-depth initial interview.
Make them feel part of the organisation. They need to know what everyone else in the company does and what the companies aims are. Some companies stick up mission statements all over the place! Including the army!
Don't (if you can) pidgeon hole them into one small job. Job expansion or job rotation can stop an employee from becoming stale. Common sense should be applied here though. If you have an employee doing one task, whose done it for years, and would be upset being moved - don't move them.
Regular Team Building events - even if it's just a couple of drinks - can help you to bind everyone together; and makes it easier for you to get to know your staff. Not only that, shop talk over a few pints can solve a few problems (too much drink can cause a few problems too).
Regular appraisals. Have a 6 month 'Mid Year Appraisal' where you formally write a report on each member of staff, let them know their strengths and weaknesses, and thank them. Then six months on - an end of year appraisal. Letting each employee know their worth every six months is good management.
Don't do employee of the month. Pizza Hut do that for spotty seventeen year olds!