WHY YOU SHOULD CONSIDER PAYING A LIVING WAGE BY: BRANDY HENDERSON
It seems like a long time ago when a cluster of organizations in NIagara began announcing their commitment to pay a proper living wage. I personally recall the Pen Financial announcement in 2018, which is when the conversation really started to buzz about why an employer should be paying such wages. Since that time, I have been privy to countless discussions where I have had to bite my tongue. I have to say, while I am extremely proud of the companies across Niagara who have announced becoming a living wage certified employer, I am equally surprised that more have not. For many years, this was a very touchy for me because of how much time on a daily basis was committed to discussing finances for the company I worked for. Budgets and forecasts and financial discussions every day of the year talked heavily about capital investment, productivity and performance. We constantly assessed our overall financial health right down to the minute (literally, in 60 second increments). We monitored and measured every fraction of time to negotiate contracts and maximize profitability. We discussed where to cut budget and where we had to invest in order to maintain or increase those margins. It was always exceptionally frustrating to me how infrequently we would advocate for increasing
the rate of pay for our employees directly responsible for driving that revenue. What continues to amaze me years after leaving the corporate environment, is how easily we can justify ROI when discussing an investment in hardware, furniture, or machinery but struggle greatly when it comes to what we pay our employee base. In my experience, it is actually harder to show an actual financial return on investing in anything other than our people, because we lack the hard data, yet those are the investment proposals that are approved. Now, I’ve been in business long enough to know why this can be hard to do. It can be quite painful at first because of the impact on your short term profitability, especially if you’ve locked into a forecast. Over time, though, it does far more than improve your company culture and overall morale - it saves you a tremendous amount of money. These financial savings come predominantly from two major areas: employee retention and performance efficiency. If you have more than 1 employee, than you likely know (or can find out) how much money it would cost to replace that employee if they left your organization. To recruit, hire, train and then onboard that staff member is a large investment of both time and money.
Retaining talent and reducing these costs could save you hundreds of thousands, depending upon the size of your organization. Additionally, when your employees generate a higher level of output, you need fewer employees to accomplish necessary tasks. In the simplest example, 9 top performers being paid $50,000 a year will cost you less than 14 average being paid $30,000 a year. Increasing employee salaries is an investment toward a more productive, higher-quality, profitable business. There are so many factors to consider when looking at this - every organization is unique and different and by no means am I implying these changes are easy. Attracting and retaining the right talent is hard, and having a higher cost associated with that is of course risky. Each organization has their own risks to weigh, which will define different strategies and outputs. What I would like to encourage, is to begin considering these factors more regularly. Every business, no matter the size, stands to see gains from reviewing their data and at minimum understanding the short-term impact and the long-term gains. By understanding the data, you can revisit it as your business evolves and beginning planning for a better future, one that benefits the financial health of your employees and your business.
REVEAL Niagara Business Magazine • Volume 1 Issue 2 • 2019