Minimum wage or maximum headache
The minimum wage is set to rise in October 2015. We also await the arrival of the National Living Wage in April 2016. The current average UK salary is £26,000 per annum. What if that was the minimum wage? What effect do you think that would have on your business?
A minimum wage to make ends meet
Dan Price, CEO of Gravity Payments in Seattle decided to introduce his own minimum wage. He set this at $70,000. His wanted his employees to enjoy a basic standard of living and not worry about how to pay the rent. To help pay for this, he cut his own salary to $70,000. Several months later, there had been some surprising affects:
- Two of his most valued employees left feeling undervalued at being paid virtually the same as those who worked 9-5.
- Some employees complained that their salary being made public had led to them being pestered for loans.
- Former friends in the business community claimed he had raised unrealistic salary expectations.
- Customers called concerned their fees may rise as a result.
- He himself has had to rent out his home to make ends meet.
Of course, on the flip side, you could argue that this bold, self-imposed minimum wage has generated a lot of Worldwide publicity. Prior to the news breaking, they were recruiting around 200 new customers per month. This figure has now increased to about 350. He feels productivity has improved as staff no longer have to spend time worrying about money. It may all work out well in the end.
Salary increases are a tricky subject for many employers. Smaller employers in particular often review salaries adhoc throughout the year. Reviews may take place on the anniversary of someone joining or in reaction to events. Quite apart from this being a constant concern, this gives you very little opportunity to look at the whole picture. It’s also easy to miss people. Your salary reviews should consider:
- Am I paying at least the minimum wage?
- What is the market rate?
- Am I paying different rates to people doing the same or similar jobs?
- If so, why?
- Does the package I give motivate my staff to achieve their best?
- Do I need to make cost savings or increase prices to pay these wages?
- Don’t forget the knock on costs of wage increases, such as pension, National Insurance and overtime rates.
- Consider setting an annual review date for future years.
Whatever you decide to do for salary increases, make sure that you keep matters confidential. If you need any guidance on how to review your salaries, please do contact me.Categories Minimum wage, Uncategorized