Dive Brief:
- Media reports of late have touted how some employers are boosting employee pay above the federal minimum wage, but new research from Aon Hewitt reveals that 72% of employers with minimum wage employees currently do not have a plan to pay those employees above the mandated rate.
- Aon Hewitt's survey generated responses from 135 major U.S. employers and was developed to better understand how employers are likely to address the impact of a government mandated increase to minimum wage rates.
- Of the employers without plans to pay above the federal minimum, 59% reported they will not address any changes until minimum wage increases become law. In the interim, they plan to adjust wages, as needed, through current salary review cycles.
Dive Insight:
"Organizations are very sensitive about increasing one of their largest fixed costs and overall expense categories, and many of them simply don't see any advantage to increasing their labor costs at this time," said Ken Abosch, broad-based compensation practice leader, Aon Hewitt.
The 28% of emloyers who are acting before the required minimum wage regulations believe doing so will give them a competitive advantage in attracting new workers (77%) and lowering turnover or increasing retention (76%), according to the report.
Regardless of the approach, Abosch says employers will face the challenge of having to counterbalance for the additional fixed costs that increasing wages will incur. What organizations will choose to do will vary, he adds, but employees and consumers will likely feel the greatest impact. "Nearly half of the actions organizations are actively considering to offset increased costs may actually undermine the value that an increased minimum wage was supposed to deliver to low income workers," he said.
