The surprising ways your business stands to benefit from a well compensated team
How you can reap the (sometimes unexpected) benefits of paying your employees well
While employees might not always say it, they want good salaries. According to a 2016 research report by the Society for Human Resource Management (SHRM) focusing on "employee job satisfaction and engagement", compensation is now the second most important factor in job satisfaction, having moved up from fourth place in 2014.
"So while factors such as respectful treatment and trust remain important, compensation is a critical job satisfaction factor — especially among Millennial and Gen X (generation x) employees," said Evren Esen, director of Society for Human Resource Management’s survey programs in the article 'Better pay and benefits loom large in job satisfaction'.
Quite simply, to develop an engaged and loyal workforce, entrepreneurs need to prioritise good salaries.
While it might seem that only employees stand to benefit, Dr Mark Bussin, a master reward specialist and executive committee member of the South African Reward Association (SARA), an organisation that develops and promotes South Africa's reward profession focusing on reward management practices that include remuneration, benefits and performance and recognition, says paying employees well is good for any business.
There are more than one way to reward your employees, says Bussin including development programmes and incentive schemes. These are implemented in the hopes of making employees more productive and in turn make the business more profitable.
"Although remuneration is meant to be confidential – it is the worst kept secret. Prospective employees know which companies pay well and look after their employees"
If you are wondering how spending more money on employees generates more profit, here are the 5 reasons Dr Bussin says it pays to pay your employees well:
1. Greater employee retention
Employees who are paid well are less likely to be on the continual lookout for a better paying job. It gives them the security they need and hopefully enables them to cover all reasonable costs.
2. It’s an investment in your employees
Part of paying employees is training and development costs. Leading organisations spend about 4% of payroll costs on training and development. This investment is expensive, but most companies have figured out the costs of not investing in training. They are often much higher than the 4% of payroll.
3. Employees become more productive
Incentive schemes are part of paying an employee. The goal of incentive schemes is to "incite better performance". Organisations that have implemented well designed incentive schemes outperform those that haven’t implemented incentive schemes.
"Organisations that have implemented well designed incentive schemes outperform those that haven’t implemented incentive schemes"
4. Create a strong employment brand
Although remuneration is meant to be confidential – it is the worst kept secret. Prospective employees know which companies pay well and look after their employees. This information improves the employer's brand and the effect of that is an easier recruitment process.
5. It strengthens EVP
The "Uber" of human resource management is the concept to EVP (Employment Value Proposition). Strengthening this forms an umbrella for all previous points mentioned. The idea here is to find a way to differentiate your employment offering from other employers. It may mean offering better non-tangible pay for example flexible works hours, longer holiday periods than your competitors.
The ultimate reason for paying your employees well is to have a focused and productive workforce. A workforce that is focused and productive is more likely to lead to better financial results and better performing companies. When that happens, the company can put more money back into the employees’ pockets. It is a win-win virtuous circle.