As the old saying goes: “money makes the world go round”.
As a company, this certainly seems true. You want to keep your costs low and sales high to maximize profits. But when it comes to wages, they shouldn’t be seen as an expense that you need to save.
You must see them as an investment. After all, it is your employees who drive your business. That is why it is important to pay a competitive salary.
Whether you are planning some cost-saving measures, conducting annual reviews or hiring a new position, take the time to consider the salaries you offer.
This article shares four benefits of paying employees a competitive salary. It also explains why paying a lower salary can be more expensive for your business in the long run.
1. Show Employees That You Care
Employees are your company’s most important assets. You must invest so that they feel that they are valuable members of your team. There are several ways to do this, such as promoting training or paying annual bonuses.
A fundamental approach is to offer a competitive salary. This is a tangible way to demonstrate your commitment to taking care of your team and is likely to be rewarded with hard work and engagement, even in difficult times.
2. Reduce Your Team’s Turnover
The main positions that are in high demand are found especially in the areas of IT and Finance. As a result, these talents can be much more selective with jobs.
In fact, Our research Half confirms this. 37% of CIOs say that IT candidates have become significantly more demanding with respect to compensation packages over the past five years.
As a result, be prepared to see an increase in the movement of your main employees, as it becomes increasingly common for recruiters to court your employees with the intention of stealing them from you at any time. This process has now become easier with the help of professional networks such as LinkedIn.
If employees are not receiving competitive compensation in relation to the labor market, the decision to leave may be an easy one. This can sometimes become a snowball effect, where other employees begin to review their own salary and consider other job opportunities.
3. The Best Talent Will Want to Work for You
To run a successful business, you need to attract the best talent. If you are offering low wages, you may be missing out on these people, who are going to competitors.
When you hire someone, the employee must realize that it is worth adding value and productivity to your business. Work so they don’t see your company as a stepping stone, an opportunity to gain some experience, before finding a better job elsewhere.
Offer a competitive salary from the start, to help attract the best talent to your business. Paying little may save money in the short run, but it will hurt your business and cost you more in the long run.
4. Low Wages Are a False Economy
When an employee leaves the company, it affects productivity and project deadlines, costing additional time and resources. There will also be other costs to be absorbed, such as time and money with hiring a replacement, your integration and training period.
In addition, to attract a suitable replacement, you will need to offer a competitive salary. In retrospect, it would be more practical to offer employees a good salary from the start and to consider salary increases, where applicable.
High employee turnover can reflect poorly on your business, impacting your collective knowledge base and impairing team morale. So while low wages may seem like a good way to increase profits, in the long run, it can lead to some significant costs and setbacks for your business.
How Do You Guarantee That You Are Paying a Competitive Salary?
If you are unsure of what constitutes a competitive salary package, our provides a broad overview of the current salaries for different positions in different sectors, including Finance and Accounting, Financial Services and Technology.
When setting wages, keep in mind that wages may vary depending on industry, location, demand and more. Although you pay more, a good prospect is to see employees as an asset valuer. The more you pay, the performance of employees increases and the more pleasure they will have in what they do. UPS does exactly the same thing in Supply Chain Management.
The job market is constantly changing, so you must regularly assess and adjust your wages, both for new and existing jobs. This can ensure that you are seen as a desirable company to work for, attract the best talent and retain your best employees.
Only by investing wisely will your employees truly love what they do and reward you with their loyalty and hard work.
Maintain Competitive Salaries Without Losing Profitability
In an inflationary context and with an increasingly marked salary overlap, which makes today more operational positions coexist with higher salaries than those who occupy hierarchical positions, maintaining a competitive salary structure is one of the most important challenges that companies are facing in the management of at the Human Resources.
According to a report on Trends and Wage Outlook in Argentina, developed by Hay Group, companies have adjusted their salary increases on the rise, with the aim of responding to macroeconomic changes in the first quarter of the year.
The planned movement for all of 2014 will be in the order of 27% and 28% while in 2013 the average was 25%; a figure that this year represents the floor of the negotiations.
With regard to particular cases, sectors such as mining and the oil and energy industries, take off from the average of the increases reported. In the first case, the movements of the first-semester exceed the general market by 2 points; while in the second, increases of 28% increase are estimated for this year.
Daniel Iriarte, partner and director of Glue Consulting – says a specialist in the recruitment of top management – adds that “in the banking and agricultural sector there will also be greater increases.”
To preserve the hierarchy for salaries, Glue Consulting observes that in some sectors it will be decided to adjust the salaries of non-unionized professionals in the same percentages as those that are within the agreement; as well as complement the increases with additional benefits. The trend indicates that this year, negotiations will be conducted one by one.
In relation to inflation, a critical factor when making adjustments, Iriarte states that “there are companies that are already planning to make three adjustments in the year, to recompose the purchasing power” and adds that “in some cases, in addition to the adjustment for inflation, companies establish an additional increase focused on retention of professionals that are valuable to the business. “
Thus, the increase in merit compensation is an increasingly pronounced practice in companies. The executive’s performance is usually measured twice a year and involves not only the evaluation of the business objectives achieved, But also the interpersonal skills and abilities developed.
Wage increases play an important role in the talent retention strategy, especially in the more technical areas of industries such as mining, agriculture and oil and gas where demand is greater and resources are limited.
However, Iriarte points out that “when thinking about the loyalty and retention of valuable executives for the company, it is key to take into account the total benefits and compensation package offered.”
In that sense, from Glue, they observe that. In a context like the current one, where maintaining the profitable operation with constant cost increases is a challenge. it is essential to appeal to creativity and complement salary negotiations with the benefits that executives currently value most senior:
- Flexibility: from the possibility of doing home office or having a gradual return of a license to be able to divide vacation days, as the collaborator prefers.
- Executive training that boosts your professional development.
- Possibilities of expatriation: the current situation means that there are more and more executives interested in the open positions that your company has abroad; Since in countries like Mexico and Brazil, where the business structures are greater, the possibility of growth is greater and faster.
Meanwhile, for the board members, the bonus is the benefit of the greatest weight.
In this regard, Iriarte comments that “it is a practice that is still very valid since for these executives it has a significant valuation. There are even companies that offer them additional incentives but abroad, which avoids the loss of the purchasing power of the coin”.
And he adds: “Mainly, they are offering stock options, that is, options to purchase a limited number of shares at a fixed price. The purchase of company shares or a pension plan in dollars or euros.”
Beyond the current context, it is key that companies strengthen retention practices to remain competitive in the medium-long term.
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