Do You Pay Your Employees Enough?

According to the U.S. Bureau of Labor Statistics, the average raise is going to be less than 1%.

Many small businesses think they can't even afford that much, so they forego raises altogether. The problem with this mindset is that in reality, most businesses can't afford not to give raises.

Cost of Turnover

Employee costs are often the number one expense of a small business.

Add to that fact the costs of turnover when employees leave and need to be replaced and it is no wonder small businesses end up laying off workers and even closing their doors.

Part of the cost lies in the expense of hiring and training new workers. That is one reason many companies reorganize rather than replace an employee that leaves.

However, this is not always the answer since it leaves remaining staff feeling overworked and underpaid.

Benefits of Raises

Studies have been conducted that show employees would rather have raises than other benefits.

While some small companies try to find new and creative ways to compensate employees such as flexible work schedules and even work-at-home days, most employees prefer getting a higher salary.

Giving employees raises enables small companies to retain quality workers even in the face of job growth.

The article, “Five High-Growth, High-Paying Careers”, shows what is expected to be high-paying careers through 2020 and the average salary.

Small companies that hire in these industries are going to have a hard time attracting new talent and retaining what they have currently unless they have a reputation as being a good place to work that pays employees fairly.

Other studies have shown that employees who are compensated fairly are more productive, improving the bottom line for businesses. They have less stress over finances and are better focused on their jobs.

Affording Raises

Even if you know the importance of giving employees raises, you may feel you cannot afford it.

Here are some suggestions to help you get creative with your budget.

• Get staff to help you find ways to cut other costs. If they know it will result in higher salaries, they may come up with some great ideas.

• Focus on top employees rather than giving raises across the board. This allows you to retain your best workers even if you can't increase everyone's salary.

• Adjust other benefits. Choose ones that have a lower value to employees and redistribute the money.

• Restructure rather than replace. Many employees will take on extra duties of an employee who quit if it means a better salary.

Some small businesses choose to offer bonuses instead of providing raises, but this has been shown to be less effective at keeping employees happy. Most workers want to see their regular salary increase rather than receiving other financial perks.

Keep your employees happy and they will stay with you and be more productive.

Instead of thinking that you can't afford to give raises, realize that you probably can't afford not to if you want to continue to be successful.