As we see a proliferation of municipal minimum-wage laws, it is a good time for employers to evaluate their compensation strategy and place in the employment market.
Even though there is not imminent state or federal legislation to increase the minimum wage, the political season brings the issue to the forefront.
Many employers need to recognize the fundamental shift in the labor market. The unemployment rate is falling. Wages are increasing as the war for talent heats up. Average hourly wages in the United States have jumped 2.5 percent over the past 12 months to $25.39 an hour, evidence that years of job growth finally are helping to generate pay raises.
Trends that started well before the recession also are challenging business leaders. The exodus of baby boomers from the workforce only briefly paused during the recession. Additionally, graduation rates from universities — particularly in science, technology, engineering and math (STEM) fields — are not keeping up with employer demand, making employees with relevant skills more valuable.
If your business employs more hourly employees, look at how much in overtime you spend. The wage and hour rules in Nevada set two tiers for minimum wage based on health care benefits. It also calls for two tiers for overtime payment thresholds. A slight raise in employees’ regular hourly rate could save in overtime payments.
Overtime costs for employees who are paid less than $10 per hour are 11 percent higher than for those paid more than $10 per hour. Employees paid more than $10 per hour generally call out less often, are more reliable and are more productive. Low pay not only affects an employer’s ability to attract the best talent, it often is the root cause of higher employee turnover and, in turn, higher costs.
To attract and retain the best talent, review your compensation model at least annually. Use resources such as the Bureau of Labor Statistics or Department of Training and Rehabilitation to get the latest information on wages in the area. Do not be shy about asking peers in your industry what they see in the marketplace.
Benefits are important as well, but be sure your employees see the value. Evaluate each component of your benefits plan to ensure it is being used. Do you have a health savings account that only a few use but has a cost to maintain? Can that be replaced with an extra day of paid time off for each employee or a quarterly performance bonus?
What if you cannot afford to increase wages? Look at incentives that have little or no cost. Can you offer flexible hours or work-from-home opportunities? The workforce is looking for more balance in addition to a higher income. Also, simple things such as recognition and appreciation go a long way in creating a culture where people feel valued.
Jeff Parker is vice president of Manpower, a workforce-solutions firm.