Payroll Management in the Face of Rising Salaries

Retaining top talent is crucial to your business success, and that is putting some significant financial pressure on small businesses this year. More productive performers are better for overall profitability, but they also come with a higher salary requirement. Your prices can go up somewhat, but you cannot push prices so high that a significant number of customers leave to find lower priced options.

We are facing an unprecedented shift in employee attitudes towards employment and compensation. In 2021 we saw employees leaving their companies in large numbers. This “Great Resignation” was being fueled by a younger workforce that was looking for more flexible terms to their employment, but that did not always mean higher salaries. Recently, however, that appears to be changing. The main reason? Inflation and rising prices.

There are a few strategies you can use that will help you retain your best people, and they are not all related to salary or benefits. Here are five:

Reduce Costs Related to Your Products/Services

Take out a feature, reduce the time per unit of sale, or reduce the size of each unit of sale, and you can trim the cost of producing your products or services. As long as you are not sacrificing quality, your customers will not leave in large numbers, and the cost savings could be used to offset the financial hit of higher salaries to some degree.

Improve Your Efficiency by Empowering Your Workforce

Efficient operations cost less, and empowering your employees to take certain actions on their own could improve the likelihood that they will stay on its own. Training them to take on new roles and empowering them to make decisions that are aligned to their own career goals can translate to lower salary demands and longer tenure. Empowering them to make decisions can expedite production and delivery, resulting in additional cost savings that could be applied in other ways.

Invest in Your Employees

Take the savings you achieve in the previous two efforts and invest it back into your workforce. It may not sound like much, but it adds up, and this is money you are already spending, so you won’t notice the hit to your bottom line. But don’t stop there. Consider actually supporting training that impacts their ability to improve the work they do for you, which is a win-win.

Flexible Work Location

Very few companies cannot offer at least some percentage of remote work. Most companies had to find a way to do this effectively – and with minimal notice – in 2020. The opportunity to work longer hours per day and fewer days may also be attractive and reduce salary expectations.

Start or Enhance a Retirement Savings Program and a Health Benefits Program

Employees are worried about their future too, so anything you can do to start a retirement program, even if it’s non-contributory, will likely help you retain talent. And with healthcare costs being so high, offering options for Health Reimbursement Arrangements (HRAs), and vision/dental plans can also be attractive to employees. Even a group Life Insurance program may help.

The key here is to be creative and learn what your employees value most before you decide what to give them. If you would like to discuss some additional ways that you can improve the chances of retaining your top talent, give us a call. We’d be happy to have a conversation with you.