Best Practices in HR

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Dave Rietsema
  January 15, 2020

Why You Should Pay Employees a Competitive Salary


Paying employees a higher salary in order to grow your business sounds like it’s counterintuitive. After all, if you paid employees less money, wouldn’t there be more money left for the business?

Low Salaries Don’t Save Money

A major cause of employee turnover is salary. If employees feel that they aren’t getting paid enough and are able to find higher-paid work elsewhere, they’ll quit and move on. Employee turnover costs companies huge amounts of money. The cost of replacing and training new employees exceeds the amount of money saved by offering lower salaries.

Low Salaries Mean Low Productivity

There are several ways in which low salaries can negatively impact productivity. First, employees who are paid less may also be less invested in their jobs and in the company. Secondly, if paying lower salaries is resulting in high turnover, your company will constantly have employees who are training.

The longer an employee has been at a job, the more efficient and knowledgable they will be. Turnover can prevent you from ever having employees who reach that level of skill at their position. Plus, an employee who is spending their time looking for a new job won’t be devoting as much time to their current one.

High Salaries Attract Top Talent

Talented employees know what they’re worth. If your company isn’t offering a competitive salary, you won’t be able to attract the top talent that your company wants. There are only so many top employees out there. If your company isn’t willing to offer these stellar candidates what they’re worth, then your competition will. Offering more money can not only attract top talent to your company, but it can also make your current staff more productive and dedicated to their jobs.

High Salaries Improve Productivity

Employees shouldn’t be viewed as an expense. Instead, they’re one of your company’s assets. Employees will be much more invested in their jobs and in the company they work for if they feel valued by that company. A higher salary is a way to show employees that they are valued. Companies can also demand higher quality of work and higher levels of productivity in exchange for that higher salary.

What Goes Around, Comes Around

Extra money paid to employees doesn’t just stay with the employees. That money will, in turn, go on to benefit the community in which you do business. Employees that have more money will spend more money. The businesses at which they spend their money will then have more money, which will eventually make its way back to more business for your company.

Higher Salaries Improve Employee Health

Employees that make lower wages, especially those at minimum wage, can struggle to make ends meet. This can have a negative effect on health as they’re less able to afford healthy, nutritious food. They may also struggle to afford to go to the doctor regularly and could be ill more often. Having a lower salary can also cause more stress, which can negatively impact both health and work. Healthy employees are more productive and efficient employees, so the investment in a higher wage can have positive improvements in employees’ lives that in turn improve their quality of work.

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