Navigating mandatory minimum wage increases and historically low unemployment rates
HR should view minimum wage increases as an opportunity to evaluate hiring and compensation policies across their companies, writes Paycor CHRO Karen Crone.
Editor's note: The following is a contributed piece by Karen Crone, CHRO at Paycor, a payroll services and HR management solutions provider.
There probably isn't an employment topic that strikes a more passionate debate than increasing the minimum wage. Even during these times of historically low unemployment, politicians, economists, business leaders and small business owners are steadfast in their positions on the impact of raising the minimum wage on business, the local economy and macro-level economic trends.
In some cities, with minimum wages approaching $15 per hour, the debate is increasing in intensity. At the same time, with unemployment levels at generational lows, businesses that hire minimum wage employees struggle to attract and retain workers.
Plot out any line and there is one common trend: Over time, wages, including the minimum wage, increase. Sometimes this is driven by a federal mandate, local ordinances or overall economic conditions.
Regardless of which side of the debate they fall on, HR pros are responsible for implementing minimum wage increases and should use them as an opportunity to evaluate hiring and compensation policies across their companies.
Today's low unemployment rates have created labor shortages in many industries that depend on minimum wage workers for entry-level positions, such as customer service employees, healthcare workers and those in fast-casual restaurants. With these groups of workers, compensation has traditionally been one of the few levers employers have to attract candidates. Many will jump to new opportunities for 25-50 cents an hour more than they currently earn.
The other challenge for HR professionals is that minimum wage increases create less compensation differentiation for higher-level jobs, leaving higher-skilled workers feeling slighted. This can cause a ripple effect throughout any organization.
Here are several tips to help HR professionals successfully navigate mandatory minimum wage increases, especially during today's employment conditions.
Stop the peanut butter spread
Mandatory minimum wage increases are evenly distributed to employees. In advance of mandatory increases, consider taking a selective approach to raising wages. It rewards top performers and can be an incentive for other employees to dial up their performance in an effort to reach top performer status. It also helps to avoid wage compression.
Use the hiring process to evaluate price points
When bringing on new staff, consider the impact of minimum wage increases on other positions. Get more bang for your hiring buck and bring in employees who will deliver more results. If a home healthcare worker receives an increase, consider the impact that will have on jobs that require more skills like nurse assistants or nurses.
Create transparency with managers
Have open conversations with managers on how to discuss wage increases with all employees. Highlight what's happening and why, and what the impact on the organization will be. With all of the access to free salary data online, it's important to prepare managers to be the trusted source of information for employees.
Support with the right systems
Evaluate all employees and measure against the set of key metrics that most impact your business. Look to eliminate trivial tasks and, therefore, increase productivity on tasks that deliver results, using technology to manage the repetitive ones.
Off-loading or discontinuing non-essential tasks can increase effectiveness of minimum wage employees and maximize your investment in them.
Focus on flexibility
Life happens. Kids get sick. Accidents occur. Things come up at the last minute. Offer employees the flexibility to adjust shifts as needed without being punitive and as business needs permit.
Listen to employees
Regardless of the level of pay, employees today want to have a voice. Make sure processes are in place to listen, especially when it relates to potential process improvements. Minimum wage employees on the front lines offer a unique perspective on how the business operates.
Cultivate the team culture
Look for the right matches when hiring employees. Everyone wants to be part of a great team. HR professionals should consider the right cultural fit as a factor as important as skills and experience. For example, is pace important or attention to detail?
Incentivize with performance standards
When a minimum wage increase is expected, fill the gap beforehand by offering incentives to improve performance. If employees can improve yields by closing more sales in an hour or answering call center questions faster, it will increase the bottom line even after the wage increase hits. Nurturing a positive culture and treating people well should result in fewer people leaving for small pay increases — creating an opportunity to attract and retain top talent.
Whatever the minimum wage is today, the one constant is that it will increase in the future. HR professionals should use these increases as an opportunity to modify compensation strategies across the company, find innovative was to incentivize workers and look to improve processes across the organization.