Things to do before going beyond the minimum wage

I’m the human resource (HR) manager of a factory with around 250 directly-hired minimum wage earners. Our attrition rate is 30%, which keeps us busy recruiting, onboarding and training on a daily basis. I’m planning to recommend to top management to increase wages to help address the high turnover rate. What are your thoughts on this? — Blue Lagoon.

Prejudice is a great time saver. It allows opinions to form without having to know the facts. So where are your facts and figures? “In God we trust, but everyone else must bring data,” according to pioneering American management consultant W. Edwards Deming (1900-1993). What’s your basis for proposing a salary increase? Do you have enough evidence to convince management about your recommendation? Have you performed objective exit interviews or conducted an employee morale survey to prove your contention that wages are an issue?

If you have nothing to back it up, then making such a recommendation might leave you on thin ice.

The strategy for employee retention must be accompanied by serious thought. Begin with a proactive two-way communication process, led by qualified line executives. Even if HR mandates regular dialogue, the result may not be effective if your supervisors and managers are not qualified. Even if they’re qualified, they may be reluctant to do it.

We can’t discount the fact that line executives are the first line of defense for management. They should be the ones to know the issues and solve them before they can be escalated to HR and top management. They must constantly have their finger on the pulse of workplace relations. They know which workers are habitually tardy or absent, which are some of the most common manifestations of low morale.

Paying the minimum wage and statutory benefits to people is more than an economic discussion. There’s more to it than meets the eye.

ROADMAP
The effect of salary on employee loyalty and motivation is one of the most studied subjects in HR. Even in the absence of a study, many of us might be tempted to default to the conclusion that wages are the main reason for people leaving. I can’t blame you for thinking that or for wanting to go beyond minimum wage.

You’ll need a careful and exhaustive study before increasing wages. Some principles to remember are that money should be tied to worker qualifications and consistent high performance, in alignment with organizational goals. Try resolving your issues using the following roadmap:

One, establish a two-way employee communication process. This includes annual employee opinion surveys, periodic engagement dialogues by line executives and their workers, town hall meetings by the chief executive officer, labor-management cooperation schemes, and many more. Of all these, I’m biased in favor of the survey because it documents the opinions of all workers, and not just the complaints of few disgruntled individuals who may have already resigned, or are well on their way to doing so.

Two, focus and solve the most common employee gripes. The survey can give you an idea on which issues should be priorities. Complaints could include poor supervision, inadequate facilities, unsafe work conditions, unclear job expectations, unreasonable production targets, unfair labor practices, and others. Of course, salary and benefits could well be the reason for your high turnover rate. Whatever other issues may emerge, there is no getting around establishing a reasonable pay structure.

Three, define the most important jobs in the organization. A clear job description is a must for setting recruiting plans, evaluating job processes, managing performance and determining training needs. Job descriptions come in many shapes and sizes depending on the nature of the business. For a factory worker, a simple and clearly-worded job description will suffice, while the job description for supervisors and managers, must necessarily cover more bases.

Last, benchmark the salaries of key jobs with the pay scale in other companies. The ideal approach is to compare your salary practices with competitors. If you’re encountering difficulty securing cooperation from your rivals, then another approach is to benchmark with other companies located within the same locality or geographical area, such as fellow locators in export processing zones. If workers leave your factory, it’s likely that they will join your competitors or companies within the same area. 

PAY PHILOSOPHY
Pricing jobs that are over and beyond the minimum wage rates is complex, but we can’t deny its importance in attracting and retaining workers. You must gather data to help you understand worker motivations, which may not be limited to achieving a pay scale that’s more than the minimum wage.

Developing an objective and competitive pay philosophy is needed to reduce attrition, but is not the end-all as workers could be leaving for other reasons.

If you conduct a thorough study that supports increasing pay of the minimum-wage earners over and above what the government requires, it would be easy to start the process of proposing higher wages. Remember that completing the roadmap that I’ve recommended above takes time.

Whatever you’re planning, feel the pulse of your top management before doing anything. Otherwise, all of your plans may be all for nothing.

Have a chat with Rey Elbo via Facebook, LinkedIn or Twitter or send your workplace questions to elbonomics@gmail.com or via https://reyelbo.consulting