What does the research say about paying hourly employees? Check out our monthly roundup of research that will help you make your business better.
Higher wages attract and retain talent.
- 61 percent of job seekers say pay was the top factor they considered when deciding on a job, according to the Jobvite Job Seeker Nation 2015 survey. Other benefits like vacation and work/life balance mattered, but pay mattered first and foremost.
- Jobvite’s 2018 survey found that compensation was the top factor for leaving a job for about one in five job seekers.
- It seems like a no-brainer that paying workers fairly helps keep talent, but small and medium-sized businesses are notorious for having a gender-pay gap far worse than the national average. The gap is 34 percent, or 18 percent less than the national average, according to a 2018 study from Zenefits. This not only hurts productivity, it can lead to loss of valuable workers.
- Raising wages is a strategic move to help prevent turnover. Losing an employee costs a business tremendously. Studies estimate that sometimes the cost can reach as high as 2 times the employee’s annual salary, according to Bersin by Deloitte. After all, when you lose an a worker, there’s a ripple effect across the business. Other employees take note, which can lead to employee disengagement, a dip in productivity, and poorer customer service. The process of hiring a new employee costs money in advertising, interviewing, hiring, and training. A new hire needs time to learn and is prone to make mistakes, leading to further costs to the business.
Better pay boosts morale.
- When your employees are happy, your business will run better. It’s why some bosses go the extra mile to offer perks like flexible hours and programs to improve work-life balance. But these aren’t addressing the top stressor of most people—money. Nearly three in four people say they feel stressed about money some of the time and nearly one in four people say they feel extreme stress about money, according to a 2015 report by the American Psychological Association.
- If you can alleviate the financial stress of your employees, you free up their minds to focus on doing their best work on the job.
- Additionally, some research suggests that higher pay leads to higher productivity among workers. Even if a business shells out more cash, they’re rewarded with more production, innovative process, and other benefits to the business, according a report by the U.S. Department of Commerce.
Well-paid workers lead to better-served, repeat customers.
- For a lot of merchants, hourly workers are the face of the company. Baristas, waiters, receptionists, and sales clerks all serve on the frontline of customer service. Satisfied employees tend to have positive interactions with customers, resulting in an overall boost to the brand and business.
- If you’re worried that higher wages will lead to higher prices and will turn customers away, that’s not always the case. In fact, 71 percent of Americans support raising the minimum wage for workers, even if it means paying more when eating out, according to a recent poll conducted by the National Restaurant Association.
Be sure to consider your business’ particular position.
- Of course, deciding to raise wages or not is entirely dependent on what your business can afford. Do the math. Look at your revenue and look at all of your costs. If there’s no room to raise wages, consider ways to improve your margins that would allow for even a minor pay bump. Maybe you need to raise prices or reduce costs. If certain products sit on the shelf for too long, or underperform in sales, consider replacing them with higher-margin, faster-moving products.
- Weigh the productivity gains of paying more against the cost of doing that. Ultimately, you have a business to run and margins to protect.
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