Money doesn’t grow on trees and perhaps being penny-wise has helped get your company to where it is today. Sometimes though, paying your employees less can actually cost you more.
Yes, you read that right.
What a company saves in labor costs by offering low wages, they often pay for in high employee turnover. Replacing an employee can cost up to 16 percent of salary for positions earning under $30,000 annually. That’s as much as $4,800 per employee! What’s more is that there’s no guarantee the new hire will stay.
In Hawaii’s tight labor market, it is more cost-effective to retain existing employees than to find new ones. In fact, most Hawaii organizations say they’ll be focusing on employee retention over recruitment, with 73 percent planning to increase wages and salaries as a key strategy.
Here are four signs you should pay your employees more.
1. Your company is experiencing healthy profits.
Business is booming and you’re finally generating above-average profits. That’s great! While you might reinvest that money or pay out shareholders, you should also consider sharing those profits with your employees—whether it be a bonus, pay increase, or promotion. Sharing in the good times validates your employees’ contributions to the company and ensures they stick around in the not-so-good times, too.
2. Your top employees are leaving.
If you don’t pay your top employees well, another employer will. Smart employees know this. With high performers delivering 400 percent more in productivity than the average employee, losing just one of your top workers can have damaging effects on the company’s bottom line.
3. Employee morale is suffering.
You know an employee’s value to your company goes far beyond how much is listed on their paycheck. But pay is almost always tied to worth in the eyes of an employee. An employee who feels underpaid will lack the motivation and drive to perform to their full potential.
4. You can’t find candidates for your open positions.
Have recruitment efforts have been more sluggish than usual? Perhaps you’re not offering the right pay or salary level. With a rising minimum wage and record low unemployment rate, attracting the right caliber of candidates in Hawaii is not easy. Promise of better pay can lure those passive (and highly desirable) job seekers from their current companies to yours.
Pinching pennies when it comes to employee pay never truly pays off. Employee turnover can eat up valuable time, resources, and money that your company needs.
Minimize turnover and avoid onboarding mistakes by partnering with ALTRES Staffing. Our temp-to-hire option allows you to test-drive a candidate so that you can find the best fit possible. Call us at (808) 591-4940 or fill out our online contact form today.