Paying higher than the industry standard is part of employee physiological and safety. To learn more about the Hierarchy of Employee Needs read our previous article here. This article is not about paying minimum wage or a living wage. To learn more about paying a living wage check out this article.
The top five reasons for paying higher than the industry standard are an increase in employment safety, gaining the image of being the best employer, attracting top performers, creating a “good” employee turnover rate, and generating higher profits or productivity. Read below for more details about each!
We say employment safety based on Maslow’s Hierarchy of Needs but more accurately it can be called employment security. The idea is that employees feel safe and secure in their job. The employee does not have to fear losing their position any time soon or suddenly without warning or reason.
Having job security allows employees to make personal long-term plans. This can be creating a proper budget, saving for vacations, or any other long-term live events. Knowing that you can participate in a life event without worries is a significant boost to employee well-being.
Happy employees will more likely recommend their employer to other hard-working people!
Imagine winning awards for being the best employer in your area! What would some amazing word of mouth you get? Nothing like being the envy of your competition and stealing top performers from them!
Paying higher than the industry standard will help fill open roles in your organization. Instead of a handful of low-grade applications, how would you like hundreds of the best people to choose from?
Top performers know they’re hard workers, and they know their worth! If they know another organization is paying more for the same role they will investigate. The loss of just a few top performers can mean a massive reduction in revenue and productivity.
The Best of The Best
If you have the best of the best working for you then they will attract other top performers. Top performers want to be rock stars, so they seek other top performers to learn from.
Some top performers can be lone wolves. This is great for revenue or productivity but maybe not for growth. The lone wolf will not help with training or work well in a team.
So, you need to see how much extra time your managers need when dealing with the lone wolf. If support is low, then the lone wolf may be worth keeping around. You should always continue to try to get your lone wolves to become better team players.
Lost Top Performer Hell
Some may think losing a few top performers is okay because with the same money you can hire more inexperienced workers at a lower wage. This is not a place your organization ever wants to be in because this is a rebuilding phase.
This means revenue or productivity losses as you train new employees. There is no guarantee the new employees will become top performers.
As hinted above you don’t want to lose your top performers. The way to have a good turnover rate is if you retain your top performers but lose low performers.
A work environment with a high number of top performers helps create other top performers. This high level of productivity naturally weeds out the low performers. So your overall turnover right may be high but that is only because low performers that have trouble are leaving.
To learn more about employee turnover check out our other article called Employee Engagement Survey. There is a great section explaining turnover rates.
Higher Profits or Productivity
It goes without saying that if you have a lot of top performers and a few rock stars your organization will have good revenue or productivity. A well-paid top performer is going to make that high payback for the organization with higher revenue and productivity.
Revenue Per Employee
With more top performers you can increase your revenue per employee. When you calculate your revenue per employee track it monthly. If you see a drop over three months, then you know you need more top performers or lose some low performers. I found this great article about revenue per employee if you want to learn more.
The best way to “lose” low performers is to train the heck out of them to see if they improve. A well-trained employee is a happy employee. This way if they do leave your organization on their own, they can’t say anything bad about you…because you did your best to help them improve.
You should spend some time researching your industry and what the average pay is for each of your types of employees. This will allow you to plan your next move.
If you need support with this process, consider LBH Business Services Inc.