As the old saying goes, “money makes the world go round”.
As a business, this certainly rings true. You will be wanting to keep your costs low and sales high in order to maximise profits. But when it comes to salaries, these shouldn’t be seen as an expense you need to skimp on.
You should view these as an investment. After all, your employees are what drive your business forward, so paying a competitive salary is important.
Whether you’re planning some cost-cutting measures, are carrying out annual reviews or are hiring for a new position, make sure you take some time to consider the salaries you offer.
This article shares four key benefits to you of paying employees a fair competitive salary. It also explains why paying a lower salary could be more costly for your business in the long-term.
1. It shows employees that you care
Employees are the most important assets of your business. You should invest in them so they feel they are valued members of your team. There are many ways you can do this, such as providing training, or annual bonuses.
A key approach is to offer a competitive salary. This is a tangible way to show your commitment in taking care of your staff and it’s likely to be reciprocated through hard work and by supporting you, even in tough times.
2. You can lower your staff turnover
Top talent is in high demand, especially in areas such as IT and finance. As a result, employees can be far more selective with jobs. In fact, research by Robert Half confirms this, with 37% of Hong Kong CIOs saying that IT candidates have become significantly more demanding about their remuneration packages during the last five years. As a result, be prepared to see an increase in movement amongst your top staff, as they shift to other job opportunities. This is escalated as hiring managers and headhunters are also busy courting employees and can poach them from you at any moment. This is a process made far easier these days with the help of professional networks such as LinkedIn.
If staff are not receiving competitive remuneration from you, yet are being offered more elsewhere, their decision to leave may be an easy one. This can sometimes become a snowball effect, where other employees start to review their own salary and consider other job opportunities.
3. Top talent will want to work for you
To run a successful business, you need to attract the best talent. If you’re offering low salaries, you may be missing out on these people, who are going elsewhere.
When you do hire someone, they may not see it worth their time to bring value and optimal productivity to your business. Instead, they may see it as a stepping stone, an opportunity to gain some experience, before finding a better job at another company. This process may save you money in the short-term, but it could damage your business and cost you more money in the long-term.
Ensure you offer a competitive salary right from the start, to help attract the very best talent for your business.
4. Low salaries are a false economy
When an employee leaves your business, it can impact productivity and project timelines can suffer, costing you additional time and resources to resolve. There will be other costs to absorb too, from time and money for hiring a replacement, onboarding and training them. Not only that, but to attract a suitable replacement, you will need to offer a competitive salary. In hindsight, it would be more practical to offer employees competitive salaries from the outset and consider salary increases where applicable.
There are not only financial repercussions from high staff turnover. It can reflect badly on your business, it can impact your collective knowledge base and damage staff morale. So, whilst having low salaries may appear to be a good way to increase profits, in the long-term, it can lead to some significant costs and setbacks for your business.
How do you ensure you’re paying a competitive salary?
If you’re unsure of what constitutes a competitive salary package, the Robert Half Salary Guide offers an extensive overview on prevailing market rates for different positions in the Finance and Accounting, Financial Services and Technology sectors. You can even access salary data categorised by “Job Category” and “Job Title” with the Robert Half Salary Calculator.
When setting your salaries, make sure you take into account that they will vary depending on the industry, location, demand and much more. If you set a salary but don’t attract the right talent, you may need to consider increasing the salary you’re offering. Although you’ll be paying more, a good perspective is to see employees as an appreciating asset. The more you pay, the better the employee and satisfied employees who love what they do become more valuable over time as they accrue new skills, knowledge and experience.
The employment market is constantly changing so you should regularly evaluate and adjust your salaries, for both new and existing roles. This can ensure that you’re seen as a desirable firm to work for, attract the very best talent and retain your best employees.
Only be investing wisely will your employees truly love what they do and reward you with their loyalty and very best effort.