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HR Connection blog

Finding the Cash to Increase Pay

Posted by Mike McKerns | Aug 25, 2021 9:30:00 AM

As summer hits its stride and life starts to return to normal in the USA, businesses are lifting pandemic-related restrictions, and the percentage of the population that has been fully vaccinated grows every day. In spite of this upswing, though, talent remains a serious concern of many companies. One recent survey of HR leaders found just over half (51 percent) mainly worried about keeping the talent they have, and just under half (49 percent) mostly anxious about attracting new talent.1  Employers are struggling to appeal to and retain talent for many reasons, but fear and money are at the top of the list.

I am confident that the fear will begin to subside as the pandemic winds down in the USA. However, I do not believe that the issue of money will be resolved any time soon. Today, employees simply expect more in their paycheck than they did two years ago. 

It’s easy to say, “Just raise the minimum wage” or “Increase the starting salary for the positions you’re struggling to fill.” But it’s more complicated than that, because implementing either solution will likely lead to the need to increase pay across the board. For example, a company that is currently paying $15/hr would be paying only minimum wage if the rate were raised to $15/hr. Likewise, a company that currently pays a starting rate of $15/hr on its own accord would need to increase the pay of current workers in order to keep in step with an increase starting wage. 

Without increasing their payroll budgets, how can companies raise pay for the departments they are struggling the hardest to staff? Here’s an idea: now that millions of Americans have mastered working from home over the past year, maybe companies should consider geographically expanding their applicant pools for remote first roles.  

According to the Bureau of Labor Statistics, both Connecticut and New Jersey have an average wage of $55,000/year. By contrast, the average wage for Florida and New Mexico is about $36,000 (which equates to a difference of about $9/hr).  If a company in Connecticut could hire remote staff in Florida, for example, it could apply the payroll savings toward increasing the rates for jobs that cannot be easily done remotely (for example, manufacturing). 

In addition to the salary savings from recruiting from areas that have a lower average wage (and lower average cost of living), companies could also realize other significant cost savings with a growing remote workforce. Once costs for turnover, absenteeism, productivity, and other factors are taken into consideration, “a typical employer can save an average of $11,000 per half-time telecommuter per year.”

Is this an unusual proposal? Sure. But over the past year we’ve all learned just how important it is to think outside the box and innovate—especially when faced with the unexpected. So maybe this suggestion isn’t as far-fetched as it might seem!

 


1 Emily Douglas. 2021. "52% of HR leaders believe this is 2021's biggest challenge." Human Resources Director Canada, April 14, www.hcamag.com/ca/specialization/learning-development/52-of-hr-leaders-believe-this-is-2021s-biggest-challenge/252245.

Topics: Salary, Increase Pay

Written by Mike McKerns

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