Is It Time to Give Your Employee a Raise?

Is the only way someone can get a raise at your company by quitting and going to work for a competitor? That’s the unfortunate reality at too many small businesses. Having worked in and consulted with small businesses for decades, I know that small business owners have a tendency to be stingy (to put it mildly). That’s understandable to some degree. Running a small business has never been easy in the best of times, and in today’s uncertain economy, hanging onto every penny can seem like the only sane response. But being penny-wise and pound-foolish never pays off, particularly when it comes to your employees. Consider what you’re risking by not giving employees reasonable raises:

• You could be driving otherwise loyal employees to seek new jobs out of sheer financial need, no matter how much they love working for you.
• You might lose the institutional knowledge of systems and history that your longest-term employees bring to your company.
• You could be fostering resentment and bitterness among your team, who feel that they’re being taken advantage of and not rewarded adequately.
• You will likely lose your best and brightest workers, since they’re the ones who can most easily find better-paying jobs. That means you’ll be left with less productive, less skilled employees who take longer to get the same work done—costing you more.
• You’re giving yourself a horrible reputation and employer brand, thanks to social media, can quickly spread and make it harder to find new employees when you lose existing ones.
• Even if you hire them at lower salaries, advertising for and training new employees to replace the ones who leave costs you money.

Look at it this way, and skimping on staff salaries suddenly doesn’t seem so smart. So what can you do to keep both your budget and your team happy?

• Assess your current wages and salaries. There are a variety of salary comparison tools you can use to find out the going rate for different jobs in your industry and region. (Employees have access to these, too, so don’t think they have no point of comparison.)
• If your rates are vastly off from what they should be, it’s time to bite the bullet. Go over your budget and see where you could cut to squeeze out money for higher pay.
• If you really can’t afford to raise salaries, consider other short-term options for rewarding employees financially, such as developing a bonus program tied to measureable goals or offering a profit-sharing plan. In such cases, employees get paid extra only if they help your company make more money, so there’s no risk of loss to your business.

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