As the demand for talent continues to be high, leadership's roadmap to raising the minimum wage should include critical discussions on why competitive pay matters and who really benefits. (Photo: Shutterstock)
We've all seen recent hiring trends like fast-food establishments are offering starting wages 50% —and sometimes even higher—more than the state minimum wage. We've all felt the pinch at the pump with gas prices approaching $5 in states like California and trending upward in most other places too. And, we've all been to the grocery store and felt like everything was a dollar more than yesterday. It's not in our minds: the U.S. inflation rate is the highest it's been in 40 years.
In many cases, the pressure to react to inflation is falling on employers. As a result, employers are not only contending with federal and state legislation for minimum wage but also increased benefit demands: what's in it for me? As performance evaluation season marches on, many employers aren't able to increase employees based on rising living costs alone. So what are companies to do?
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The implications of rising minimum wages and even salaried wages certainly impact a company's bottom line. Any time a company drastically increases wages—whether via government requirements, living cost changes or adjusting to market value—there will be profitability implications. What if that could be a good thing?
When employers invest in their employees, they will see greater returns. Competitively compensated employees are more easily retained and engaged. While this idea will lead to difficult discussions with owners and finance, the demand for talent can't be won on a company's good looks alone.
As the demand for talent continues to be high, leadership's roadmap to raising the minimum wage should include critical discussions on why competitive pay matters and who really benefits. In fact, a survey of nearly 1,000 full-time employees showed what we thought: salary is still the number-one indicator for why a person accepts a job offer, followed by location (including remote), then interest in work and then work/life balance.
When employees are looking for new positions, they are considering how the company will support their quality of life and their family's quality of life. These basic principles will not change and are employee demand table stakes. What does need to change, however, is how many employers view total compensation package. Does it include, at a minimum, competitive, market-aligned salary, does it include the basic benefits an employee would expect in 2022, does it include learning and development opportunities, does it include more modern benefit options like discounts to stress-relieving offerings, does it include opportunities to connect and give back to their local communities? There are risks in not addressing these questions – employees will leave, candidates won't choose them.
Many companies don't compete on salary alone though. Compensation can be more than the base wage range, such as training accessibility, bonus potential and reimbursement.
The employee experience is more critical than ever. Not only do employees need to understand their compensation package but also feel empowered to know what's next. Employers shouldn't sleep on employee empowerment's role in their career development. Offering career pathing, clear goals, self-service options, modern performance reviews, and purpose-driven programs and vision.
It costs nearly two times the salary to replace any employee and, if the role remains open, that cost goes even higher. Salary increases tend to always pay for themselves. When our company started to raise the minimum wage, we saw an immediate reduction in turnover.
HR is often flying blind to these insights though. Investing in people analytics technology can help them do what-if scenarios. If we raise compensation for this group, what is predicted to happen with retention and performance? For many, this seems out of grasp but it's readily available for small businesses as it is large.
The important takeaway, however, is that employees need to feel valued, supported and that their employer is going to provide a good quality of life and propel them to the next phase in their careers. Minimum wage demands should be employee experience discussions. Period.
Amy Mosher is chief people officer at isolved.
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