And can a minimum wage of $70,000 p.a. actually improve business?
A Pop Quiz…
An average-performing employee comes to you with evidence that he is underpaid by 10 percent. Your company’s budgets are already tight. He makes $60,000 a year.
Should you…?
- A. Offer a 5-6 percent raise?
- B. Offer nothing. In this economy he’s lucky to have a job?
- C. Offer a 10 percent raise?
- D. Give him $50 gift card to the local mall?
You may not want to choose any of the above and it might seem like good business sense to let your employee quit rather than raising his salary to be competitive but employee turnover is expensive. And even more disheartening to the employees that stay and terribly disruptive to your workplace culture.
Research estimates that turnover can cost your company as much as 20-30% of the employee’s salary!
So you do the math: productivity losses, training expenses, recruiting, drains on other employees, impact on team morale and lost work while the position is vacant – make a 10% increase in one person’s salary pale in comparison!
Consider the impact of becoming proactive in your compensation and workplace culture decisions.
Did you too start running the math after reading the recent NYT article about the new minimum wage at Gravity Payments, where every employee at the Company now makes a MINIMUM of $70,000/year? That’s reportedly more than double what many of the Gravity employees had been making prior to the announcement.
So, why would Dan Price, CEO Gravity Payments make such a move?
Well here’s where the story gets even more interesting!
Recent “Happiness” research has shown that when plotted against log income, life evaluation rises steadily (and a clear connection between employee loyalty, culture, and client satisfaction). Emotional wellbeing also rises with income, but there is no further progress beyond an annual income of ~$75,000.
With employee satisfaction and happiness, productivity also rises. So, doesn’t it stand to reason that if you can proactively affect people’s happiness by raising your company’s minimum wage, thereby removing your employees’ preoccupation with market compensation rates – why wouldn’t you choose to take control?
The positive outcomes include increased employee retention and engagement, improved workplace culture and ownership, leading to productivity and profits.
In the “happiness” scenario everybody wins.
We believe that “Happiness” is a compensation philosophy worth exploring. And, we have recently done just that with several of our clients who have come to recognize that employee engagement can be positively impacted by intentionally deviating from an exclusively quantitative approach to compensation programs.
As a result, our clients have experienced a significant improvement in client satisfaction, sales improvements and a reduction in turnover and the disruption that accompanies turnover. In other words our clients have taken positive control and created compensation programs that really work!
And the answer to our Pop Quiz?
The answer to our pop quiz is: a 10% raise, and partnering with a Compensation Consultant to conduct a proper market analysis is the best option in this context. Although, it would have been nice to have avoided the situation all together like many of our clients have been able to do!
Want to know more? Read some more of our Compensation and Benefits Case Studies, or email info@pendolinogroup.com for more information.
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