How to Know if You Can Afford to Give Your Employees A Raise
The lifeblood of any company is its employees. Keeping your employees engaged and happy with their work is what every growing business should strive for. While employees leave for a wide variety of reasons, the pay can be a major cause of employee turnover. If the employees feel they aren’t valued by the company or paid enough for their work, that’s the time they consider looking for other jobs. But does raising your employees’ pay help solve this problem? More importantly, can you afford to give them a raise considering the financial state of your business?
Criteria for Giving Raises to Employees
Giving raises isn’t always possible due to a number of factors. It is your job as the business owner to know when and how to give your employees a raise. When giving a raise, consider the following factors.
If an employee shows exemplary behaviour and performance at work, then that’s always a good reason to give them a raise. Your employees invest their time and skills in contributing to the growth of the company. If they’re really good at doing their job, then it’s only logical to also invest in them by giving them a raise. Providing merit-based pay increases is also a good way to motivate employees to perform well and go above and beyond their duties.
Cost of Living
If you hired accounting services for your small business, they probably know the current industry pay standards. These are usually based on the type of work involved, current market conditions, and also the cost of living in the area.
As you may very well know, the cost of living rises every year. Even if an employee doesn’t earn a raise based on merit, increasing costs of living should be taken into consideration when reviewing your employees’ salary. What was once a good wage before may no longer be enough at present.
Part of the job of business leaders is to constantly develop their employees. If you allow them to be better at their job and become more efficient, then it’s easier to give them a raise. Calculating the employee’s improved skills into a pay raise can encourage them to continue to use those skills at your company. Essentially, it’s a win-win situation for both the company and your employee.
Length of Service
Rewarding loyalty in your company is an excellent way to retain employees. That said, employees who’ve been with the company for several years are good candidates for giving a raise. They will know that their experience and contributions to the company are valued. This effectively reduces turnover and helps keep employees happy and motivated to stay with the company for long.
Whenever an employee meets the company’s expectations when it comes to work, that doesn’t necessarily warrant a pay increase. That just means they’re doing the bare minimum of what is expected by the company. However, if the expectations for an employee change and they have to take on more responsibilities for the same position, those increased expectations should be reflected in their pay.
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