Today, companies are facing unique challenges when it comes to wage management. Shifting expectations in the post-pandemic workforce, pervasive skill gaps, general labor shortages, and rising inflation are all altering the pay equation.
Generally, organizations have had little choice but to up wages to attract new talent. However, that creates difficulties in other areas. Along with increasing a major cost center, wage increases for new hires impact your existing workforce, as most will expect treatment in-kind or may leave if they feel their wages are falling behind.
While that may make it seem like waiting out the wage increases is inherently a wise move, doing so comes with both benefits and drawbacks when it comes to business revenue. If you’re wondering how a delay could work for or against you, here’s what you need to know.
The Benefits of Waiting Out the Wage Increase
In most cases, the clearest benefit of waiting out the wage increase and keeping your salaries stable is ensuring your payroll expenses don’t balloon too quickly. Often, employee-related costs are a significant line item on any company’s budget, with even small across-the-board shifts having a massive impact.
By bucking the current trend and keeping wages steady, you’re ensuring a critical cost center remains predictable. Since inflation is also impacting other business areas, that could be essential for staying profitable.
Sidestepping wage increases can also allow your company to look at more cost-effective ways to attract talent and boost retention. For instance, you may be able to reduce the cost of medical coverage or increase company-provided retirement contributions for less than a company-wide raise would cost. However, since the benefit provides clear value, employees may view the move just as favorably, allowing your business to save while meeting the needs of your workforce.
The Drawbacks of Waiting Out the Wage Increase
When it comes to the drawbacks of attempting to wait out the wage increase, the most significant is losing out on top talent. Ultimately, highly skilled professionals generally understand that they have options. As a result, if the wages your company offer fall too far behind the curve, your best and brightest may seek out opportunities elsewhere.
Similarly, low pay rates can create recruitment challenges. You’ll have trouble attracting top talent if your compensation isn’t at least in line with competitors. As a result, delaying a wage increase could hinder your company on both fronts, ultimately leading to workforce challenges – like lower morale and diminished productivity – that cause profitability issues.
Choosing the Right Approach for Your Business
Ultimately, whether waiting out the wage increase is best for your company depends on your unique needs and situation. If your total compensation is generally competitive and you have a strong, loyal workforce, you may be able to either delay or implement changes at a slower pace, allowing you to preserve revenue-generating power.
However, if retention or recruitment is an issue due to your company offering lower pay, you may need to bump up your salaries simply to remain competitive. Otherwise, your unstable workforce may harm your bottom line far more than increased wages could, making the raises worthwhile.
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