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Why You Should be Paying a $70K Minimum Wage
Does money make all the difference for employee morale? Here are three reasons of why a high minimum wage may be genius, and three reasons why it’s crazy.
By now, you’ve probably heard the headline of the Seattle CEO who decided to raise his company’s minimum wage to $70,000 a year. His company, Gravity, has roughly 70 employees and processes credit card payments for businesses, currently paying an average salary of $48,000 a year. While some people think he’s out of his mind, company employees are ecstatic. Here are three reasons of why this bold move may be genius, and three reasons why it’s crazy.
If you have the money and are considering mirroring this company’s move, here are three reasons why offering a $70K minimum wage may be a good idea:
- Employee morale: This company, Gravity, didn’t just have extra cash sitting around; its founder and CEO Dan Price decided to drop his own $1 million per year salary to $70,000 in order to help raise everyone’s salaries. With this type of sacrifice and the mere appearance of the CEO being at level with his employees, you better believe Gravity will experience high employee morale.
- Loyalty: If any employees were looking to jump ship prior to this announcement, things have changed. The company will likely experience a significantly low “bad turnover” rate for at least the next year and employees will probably boast about working for this company that values them so highly.
- Rising up to the challenge: There’s a mantra that implies that employees will rise up to the level of what they’re paid to prove they’re worth the money. It’s similar to playing against a high caliber sports team where the underdog rises up to a higher level of play. Whether or not these employees deserved the salary boost, many will automatically align their performance with the new pay scale.
Even if your company can afford giving all employees a $70K/year minimum wage, here are three reasons why you may want to rethink the idea:
- De-motivation. If a low-energy, low-achieving employee is automatically receiving more than double his/her worth now without having to earn it for job performance, it may frustrate and demotivate your high performing employees that still have to work with that person. Managers would need to stay on top of employee performance to avoid any underachievers.
- Neglecting other retention tools. Money is just one element to employee satisfaction – of course, a very crucial element – but not the complete solution. Paying employees an extraordinary amount will certainly help their cash flow, but should never overshadow the less-costly retention measures of recognition, appreciation, and getting to know employees personally.
- Personal finance concerns. Many employees may now be making more than double their previous income and aren’t equipped to make smart financial moves (think “Study finds 1 in 6 NFL players go broke within 12 years of retiring”). If you’re going to significantly increase employee pay – with or without merit, you may want to also offer financial planning classes to help your employees make smart money choices.
If you’re like most small companies and don’t have the cash to offer a $70,000 minimum wage to all of your employees, you can still get the high employee morale and loyalty you’d like from your staff. Read Three Easy Ways to Retain Great Employees for ideas, or contact our Human Resources team to learn more.