Last week, Montgomery County Executive Isiah Leggett vetoed the County Council’s move to raise the minimum wage to $15, granting a reprieve to businesses and dealing a blow to low-wage workers at the same time.
Minimum wage increases are generally seen as progressive, so why would a liberal Democrat like Leggett make such a move?
“I remain concerned … about the competitive disadvantage [the bill] would put the county in compared to our neighboring jurisdictions,” Leggett wrote.
The debate across the U.S. continues to rage — will minimum wage increases put companies out of business? Or will they help boost the economy by providing more workers with a living wage?
But, in the absence of a required minimum wage increase, how do you know that what you’re paying right now is, in fact, enough?
Plainly speaking, you will likely know if the amount you’re offering is too little if you get too few applicants. However, what if you get a lot of applicants, but few from experienced professionals? If your talent pool appears unqualified, it could be time to give a higher base pay a test drive.
And, what if your talent (especially your top talent) is fleeing? If your best workers are ‘exiting stage left,’ implementing exit interviews across your departments is priority number one. An employee’s reasons for leaving can vary.
- Do they feel that advancement opportunities are few and far between?
- Do they feel disempowered?
- Is the workplace dismal or discouraging?
Gathering honest feedback is your best bet when facing a retention crisis. Ultimately, if your employee is unhappy with his salary, the company will end up paying for that salary increase in other ways: namely, on the back end when recruiting for a replacement.
All these concerns unquestionably come into play. But in the end, it usually comes down to two things: the boss or the money. Workers will routinely drive farther and endure other hardships to earn heartier paychecks.
Getting this right is critical to the success of your business. Finding and training new people can be costly. According to ZaneBenefits.com, the cost of losing one employee is “16% of annual salary for high-turnover, low-paying jobs (those earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328. 20% of annual salary for mid-range positions (earning $30,000 to $50,000 a year).”
Fix Internal Equity Issues
Before you concern yourself with what your competitors are paying, take a close look at your payroll; your employees are much more likely to become unsatisfied when internal equity is out of whack, than when their friend at a company next door is getting paid a bit more.
If you don’t think you can afford bumping up your employees’ base compensation, consider offering better benefits: more days off with pay, the opportunity to telecommute or perks like the ability to use frequent-traveler benefits for personal use.
And, if you haven’t analyzed your compensation structure, now may be the time. Charge human resources — or an employee, if you don’t have a whole department — with the job of defining each job and its accompanying expectations. That way, you have a document you can pull out and turn to when questioned, and that can help ensure that pay, especially for your top talent, is competitive and fair.
Don’t Guess, Find Proof
Geography plays a big role in compensation determination. The salary in Bethesda, Maryland, is going to be substantially higher than the salary for a similar job in Bangor, Maine.
To get your finger on the pulse of your industry and its accompanying wages:
- Do research. Look online at sites like Indeed and Monster and see what they have to say about what professionals in your area are paid.
- Network with industry professionals. Nothing compares to the hard data you’ll get from chatting up people in real companies. No, you won’t get the breadth of information that websites can reveal, but your facts and figures will be straight from the horses’ mouths. Join associations, attend seminars and don’t be afraid to ask: “What are you paying your top executives?”
- Ask for a salary history (but don’t take it as gospel). It is only a rough estimate; their last job could have required less responsibility, it may have been a freelance position, or it might have been in another city., was a freelance opportunity or was in another city. Use this number as a guideline. (Ultimately, this could only be a short-term strategy, as the practice of asking for salary history may be banned as, just last week, “Philadelphia Mayor Jim Kenney signed a pending wage equity law on Monday that will prevent Philadelphia employers from asking job applicants to disclose their salary history, a measure intended to prevent discrimination and ensure equal pay for women and minorities.”)
Knowing how to retain the best employees is one of the little-known secrets to running a successful business. And, often, the best way to accomplish this is to pay them just a little bit more than the company next door.