Should You Pay Your Employees More?
Employee pay is one of the toughest and most contentious topics in HR. How much should you pay employees to maximize profits, while at the same time paying enough to maintain loyalty and productivity?
Although it can be tempting to maximize profits by cutting wages, the consequence of such low-wage practices is low employee performance, low motivation, and can cripple your business. Study after study has confirmed that paying higher salaries results in increased productivity and also higher profitability for the business.
For example, a study published by United States Secretary of the Treasury Janet Yellen way back in 1984 supports this by stating, “reduced shirking by employees due to a higher cost of job loss; lower turnover; an improvement in the average quality of job applicants and improved morale.” A more recent comparison between US retailers also shows that Costco – which pays comparatively higher wages – is more profitable than its closest competitors.
Making More Money by Switching Jobs
Though the COVID-19 pandemic has turned the labour market on its head, paying your employees higher salaries is still a good idea.
A survey conducted by BrioHR has seen 3 in 4 respondents expect a salary increase of more than 10%, while 1 in 4 respondents expect a salary increase of 2% to 10% in 2022. The survey, which polled hundreds of professionals in June of this year, shows that higher pay is also high on the minds of employees for the upcoming compensation cycle.
In addition, according to a survey conducted by JobStreet survey in December, 80% of employees were considering changing jobs because they could make more money by doing so than by staying put. The average 3% to 5% annual pay increases simply cannot compete with the double-digit increases that workers can obtain by changing jobs.
Hence, companies paying minimum wage will be outgunned, outmanned, and eventually overtaken by their more generous competitors. Furthermore, currently the employment market is very much a talent-driven market, where talented employees are needed across virtually every sector. In addition, the rising costs of living are pushing employees to seek better pay.
A Strategic Interest in Higher Salaries
With the economy recovering from the pandemic, it’s possible that wage increases are not yet feasible for many businesses, especially small and medium enterprises (SMEs).
Still, to remain competitive as an employer, companies will have to demonstrate a commitment to higher wages. Astute employers are taking steps to close salary gaps and ensure that all employees are paid fairly. They recognize that a cautious 'wait and see' approach to compensation is risky and can lead to the loss of top talent.
What’s more, when employees feel that the only way to keep up with inflation is to change to a higher-paying job, they will. This hurts the business not only in terms of turnover, but also in terms of team morale and productivity. When their colleagues see their teammates resigning in favour of a better job, they will also be tempted to switch. This cascading effect is devastating to businesses that rely on employees’ knowhow to keep things running.
Therefore, it makes sense to pay top performers top dollar in order to keep them at the company. It is in the strategic, long-term interests of the company to pay more, attract the right people, and keep them.
Unlock Your Employees’ Potential with BrioHR
Aside from a great compensation package, HR software can also unlock your employees’ potential by freeing HR from repetitive tasks. Instead of doing paperwork, your team can build learning and development plans, create a great onboarding experience, or even organize a team-building getaway!
BrioHR’s all-in-one, cloud-based solution with nine powerful modules automates repetitive tasks and empowers HR in a user-friendly interface. This enables business owners and HR teams to truly focus on what matters most – people.
Visit briohr.com and get a free demo now.
Employee wages are one of the toughest and most contentious topics in HR. How much should you pay employees to maximize profits, while at the same time paying enough to maintain loyalty and productivity?
Although it can be tempting to maximize profits by cutting wages, the consequence of such low-wage practices is low employee performance, low motivation, and can cripple your business. Study after study has confirmed that paying higher salaries results in increased productivity and also higher profitability for the business.
For example, a study published by United States Secretary of the Treasury Janet Yellen way back in 1984 supports this by stating, “reduced shirking by employees due to a higher cost of job loss; lower turnover; an improvement in the average quality of job applicants and improved morale.” A more recent comparison between US retailers also shows that Costco – which pays comparatively higher wages – is more profitable than its closest competitors.
Making More Money by Switching Jobs
Though the COVID-19 pandemic has turned the labour market on its head, paying your employees higher salaries is still a good idea.
A survey conducted by BrioHR has seen 3 in 4 respondents expect a salary increase of more than 10%, while 1 in 4 respondents expect a salary increase of 2% to 10% in 2022. The survey, which polled hundreds of professionals in June of this year, shows that higher pay is also high on the minds of employees for the upcoming compensation cycle.
In addition, according to a survey conducted by JobStreet survey in December, 80% of employees were considering changing jobs because they could make more money by doing so than by staying put. The average 3% to 5% annual pay increases simply cannot compete with the double-digit increases that workers can obtain by changing jobs.
Hence, companies paying minimum wage will be outgunned, outmanned, and eventually overtaken by their more generous competitors. Furthermore, currently the employment market is very much a talent-driven market, where talented employees are needed across virtually every sector. In addition, the rising costs of living are pushing employees to seek better pay.
A Strategic Interest in Higher Salaries
With the economy recovering from the pandemic, it’s possible that wage increases are not yet feasible for many businesses, especially small and medium enterprises (SMEs).
Still, to remain competitive as an employer, companies will have to demonstrate a commitment to higher employee wages. Astute employers are taking steps to close salary gaps and ensure that all employees are paid fairly. They recognize that a cautious ‘wait and see’ approach to compensation is risky and can lead to the loss of top talent.
What’s more, when employees feel that the only way to keep up with inflation is to change to a higher-paying job, they will. This hurts the business not only in terms of turnover, but also in terms of team morale and productivity. When their colleagues see their teammates resigning in favour of a better job, they will also be tempted to switch. This cascading effect is devastating to businesses that rely on employees’ knowhow to keep things running.
Therefore, it makes sense to pay top performers top dollar in order to keep them at the company. It is in the strategic, long-term interests of the company to pay more, attract the right people, and keep them.
Unlock Your Employees’ Potential with BrioHR
Aside from a great compensation package, HR software can also unlock your employees’ potential by freeing HR from repetitive tasks. Instead of doing paperwork, your team can build learning and development plans, create a great onboarding experience, or even organize a team-building getaway!
BrioHR’s all-in-one, cloud-based solution with nine powerful modules automates repetitive tasks and empowers HR in a user-friendly interface. This enables business owners and HR teams to truly focus on what matters most – people.
Visit briohr.com and get a free demo now.
