The Employee Compensation Dilemma

Are you facing the employee compensation dilemma? It begins with how you see your employees. Are workers mostly financial burdens who diminish your company’s profitability, or are they engines that drive the growth of your bottom line? How you view your workers’ contributions, says Galen Emanuele of ShiftYes.com, determines how much you choose to compensate them. The way you compensate them, in turn, directly affects their performance and engagement levels—and your profitability. Now you’re fully experiencing the employee compensation dilemma.

On the one hand, it seems as if paying as little as possible would be a great way to maximize your profits. After all, every business exists to make a profit, right? But scrimping on wages may not actually be an effective method for cutting costs. On the topic of giving raises, Scott Kuethen, Amtec’s CEO, comments, “”If you want to have a good strong team and remain competitive, you’ll need to reckon with fair market compensation. Trying to save a few dollars may result in poor performance, diminished employee engagement, and loss of the competitive edge you need to stay profitable.”

Think about the last employee you hired. How much did you spend advertising your job opening? Did your business’s productivity suffer while you or your hiring manager interviewed candidates ? (According to Society for Human Resource Management or SHRM, the average time it takes to fill an open position is 42 days.) You may have also paid other employees overtime to cover the gaps while you conducted interviews for someone to fill that empty seat. Once you made the hire, onboarding wasn’t cheap—you had to train your new worker and pay full wages even though he or she wasn’t immediately productive. SHRM estimates that you will likely spend the equivalent of six to nine months of an employee’s salary in order to find and train his or her replacement.

But high turnover costs even more than you think, says the Huffington Post. The impact of a departing employee on morale is hard to measure. If he or she leaves for a higher salary somewhere else, it could set off a whole chain of requests for a raise within your company. If that employee is also disgruntled or enamored with greener grass somewhere else, his or her attitude is bound to negatively influence those left behind.

Emanuele gives six reasons why poorly compensating your employees is not going to save you money in the long run. If you’re feeling torn between keeping costs down and keeping employees happy, read my quick summary of his six reasons:

1. Great performers don’t work for poor wages.
2. Poorly compensated employees spend time searching for a better job, not focused on their work.
3. Employees perform best when they feel that you value them over company profits.
4. Underpaid employees don’t serve customers well, and underserved customers don’t return.
5. You can’t expect much from employees whom you don’t pay well.
6. Your competition will be happy to pay the going wage for your great (departing!) employee.

Are you feeling the pain of the employee compensation dilemma? To help your employees stay loyal and remain with your organization, remember the link between compensation and retention. Choosing to compensate your people at a level that makes them feel they are getting the best deal out there will give them fewer reasons to consider leaving.

Need help determining compensation for an open position? Click here or call (714) 993-1900 to request an employee or discuss a workforce management issue.