Why Keeping Employees Pays Off Long-Term
When things get lean in a business, one of the biggest expenses is wages and salaries. The temptation is to try and keep that cost down, which can mean that there’s a reluctance to give employees a pay rise. Although that can be tempting, as it does keep that very large number from trending upwards, it can actually end up costing you more, if one or more employees decides to jump ship and you have to employ somebody new.
If what you pay your staff isn’t keeping up or above what others in your industry are paying, you run the risk of losing your valuable employees to your competitors. Which although that looks fine, because you can just pay the new person the lesser rate, it pays to consider the costs involved with replacing that employee. There’s the obvious cost of advertising, interviewing and onboarding a new employee. However, often the time spent training the new employee (whether that’s your time or another employees) and waiting for them to get to grips with doing things the way your business does them can result in reduced efficiency and productivity – which could impact sales and/or profit.
Once you run the numbers on the actual cost of onboarding and training a new employee, it may work out cheaper to have given your employee(s) a reasonable pay rise – as long term that benefits them and your bottom line. An Australasian survey in 2021 equated the cost of employing a new staff member at around 40% of their salary – which based on the current median wage in New Zealand is just over $26,000. So although on one hand you’ve kept your salary/wage costs lower, you’ve added $26,000 expense somewhere else in your budget.
When considering a pay rise for your employees, make sure to research what others in your industry are paying, factor in inflation as well as the current increased cost-of-living and how much value your employee(s) add to your business. It can also be a good time to have a discussion with some employees about extra benefits – sometimes it’s not about the money but about flexibility or a nine-day fortnight.
If you’d like help running the numbers to see what the real cost would be, let us know, we’d be happy to help.
To discuss all your account matters please call us on 09 438 1001
