Why it Pays to Pay More


PayScale’s compensation data indicates that an overwhelming majority of employees gave pay raises last year. For millions of workers, this is good news. However, raising wages across the board is a daunting scenario for most businesses.

The #Fightfor15 movement has shaken up some of the largest Fortune 500 companies. They fear what might happen to their overall business practices if the fight wins and $15/hour becomes an industry standard. Losses in profits, layoffs, among other things are top concerns by companies who will be affected on a large scale.

While wages haven’t jumped quite to $15/hour yet, wages have been on the rise in the past three years. According to 2015 Compensation Best Practices report, in 2014 85% of employers gave pay raises, a number that is up 4% from 2012.

Why it pays to pay

The benefits of raising pay outweigh the number of perceived consequences. This doesn’t have to be up to the $15/hour because that’s unrealistic for a lot of companies, but routinely raising pay to fit the market are encouraged for the numerous benefits that come out of it. The top three benefits of raising worker’s pay are productivity, increased morale, and a better employer brand, making it easier to hire stronger employees in the perceived war on talent.

As the talent pool grows stronger and highly sought after candidates are being able to pick from three to four top companies it’s more important than ever to show a strong employer brand. This means making current employees happy enough and building a culture that is beyond reproach. You cannot do this without having a strong compensation model. Paying employees market or even above market value for their positions will help decrease turnover and increase word-of-mouth of how great the company is that they work for.

The brightest and best example of a company doing right by raising wages is Costco. In a recent study done by a professor at the University of Denver, he found that although Costco pays 40% more than it’s biggest competitor, Sam’s Club, they’re still profitable. The same study points out a few other giants such as Trader’s Joe and Quiktrip who are increasing wages in a market where price per good is extremely competitive.

The most interesting thing that came out of this study is the thought on how managers actually perceive workers. Do they see them as costs that cut profitability or do they see them as a machine that drives revenue? In order to pay worker’s more managers are going to have to start thinking of employees as the latter and look for other ways to cut cost. How does your company see its workers? Are they simply an added cost to the bottom line or do you view them as revenue generating machines that are tied directly to the success and growth of your company?

Learn more about compensation and what other companies say they plan to do by downloading the 2015 Compensation Best Practices whitepaper.

Want to know what’s hot in compensation? Don’t miss the free webinar on Thursday, June 18, 2015 at 10 am PST – The Pay Transparency Challenge with our very own Mykkah Herner, MA, CCP; and Paige Hanley, CCP; as they discuss pay transparency as a way of increasing trust within your organization to drive engagement, productivity, and business results. You don’t want to miss this information packed session!  Register here

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