Why Employees Quit: Low Pay
Hiring an employee may — at first — seem equivalent to investing in a machine or piece of equipment. Newer and inexperienced managers often slide inadvertently into this analogy, and they often assume that if a piece of equipment is designed to do one thing, and a cheaper unit can accomplish the task just as well, the cheaper unit must objectively represent the better choice. For inexperienced managers, rejecting a higher priced applicant (or dismissing a more expensive employee) in exchange for a cheaper one might seem like a no-brainer.
But as they gain experience and industry knowledge, smart managers and leaders recognize that this analogy just doesn’t translate into the realm of human employees. In the world of management and staffing, cheaper is rarely better — if ever. Here’s why.
Quality Employees Insist on Respect—and Compensation.
Far too often, promising start-ups are derailed and promising companies go under simply because their managers fight employees for every dollar. These companies play hardball during salary negotiations, resist minimum wage legislation, and squeeze employees for every hour of time on the clock, believing that this stance will have no impact on employee motivation, loyalty, or retention. The bitter truth: It certainly does have an impact. Employees who feel they must fight for every raise receive a clear message: Their work is not valued. And eventually, they respond the way anyone would: They leave. When they go, they take their institutional knowledge and their years of experience and training with them.
Sometimes the appearance of a grasping company culture can cause more harm than low salaries themselves. Companies that are (or appear to be) generous and loyal to their employees can gain more ground than those who brush off raise requests or quickly resort to layoffs when they need to cut costs. Studies show that employees will tolerate low pay if their employers appreciate them and value their contributions. But the right attitude only goes so far; employees still have to pay their bills.
Low Salaries Don’t Attract Applicants
If you aren’t willing to provide competitive compensation, don’t expect a large pool of excellent applicants. Those who have more options will apply elsewhere, and applicants who appear qualified, or overqualified, will likely use this low paying job as a stepping stone to something else. Again, when they leave, they’ll take the cost of hiring, onboarding, and training with them as they walk out the door. Turnover can be much more expensive than fair offers and regular annual raises.
In most traditional employee-employer relationships, money isn’t just money; It’s a stand-in for respect. In this way, little overlap exists between people and mechanical equipment. When it comes to your most valuable resources (your human resources) cost-savings are rarely what they seem.