Addressing the Delicate Issue of Wages and Benefits

Addressing the Delicate Issue of Wages and Benefits
July 10 05:23 2017 Print This Article

In an economy still struggling to overcome some of the long-term impacts of the Great Recession, tight profit margins are preventing some companies from giving their employees the kinds of raises they were used to in the past. Indeed, everything from wages to benefits are affected when companies do not have high enough margins. They have to walk that fine line of hiring and retaining key talent without going overboard on payroll.

The delicate issue of wages and benefits applies across the board. Whether a company does payroll in-house or outsources it to a third-party provider does not matter. And whether you are talking a small business of fewer than 50 workers or a larger company with thousands of employees doesn’t matter either. If profit margins are not high enough, wages and benefits tend to suffer.

At BenefitMall, a Dallas-based provider of payroll and benefits administration services, they see firsthand how profit margins affect employee compensation. They are fully aware that HR departments are struggling to recruit and retain talent as business picks up and the number of available candidates shrinks.

Three Things to Focus On

In a recent story circulated by CBS news, the average profit margin for small businesses between 2014 and 2015 was reported at just 7.2%. That is a pretty tight margin given the fact that businesses tend to shoot for something in 10-15% range. When profit margins remain in single digits for too long a time, they have a profound impact on wages and benefits. So what is a company to do?

According to the CBS piece, there are three things businesses can focus on:

  • The Competition – Even when profit margins are tight, small business owners have to compete for the best talent. It is helpful to look at what the competition is offering to see if a company can come up with something comparable.
  • The Cost of Living – A big part of wages and benefits is cost-of-living. If an employee cannot pay the bills, that worker is almost certain to start looking for another job at some point. Cost-of-living always takes precedence in wage and benefit considerations.
  • Benefits Instead of Wages – When tight profit margins reduce cash flow to the point that wage increases are not financially practical, companies can look at increasing benefits in lieu of pay raises. As just one example, health insurance contributions are tax-deductible. Contributing more to employee health plans could increase worker satisfaction while costing less than pay raises.

Staff Is the Greatest Asset

Companies are limited in what they can do to increase profit margins in a sluggish economy. As the economy picks up over the next 6 to 12 months, optimistic business owners foresee higher profit margins down the road. Between now and then though, they must always remember that staff is the greatest asset they have.

The issue of wages and benefits is indeed a delicate one right now. But if staff are to be retained, employers cannot run away from it. It is quite likely that competition for the top talent in nearly every industry is only going to heat up in the coming months, so employers need to be willing to look for creative ways to address the wages and benefits issue.

Benefit Mall suggests taking payroll and benefits out of the back office and putting it in the hands of a third-party provider capable of offering creative solutions. Outsourcing payroll to a company such as Benefit Mall not only saves time and money but it also gives employers access to a handful of innovative benefits packages that could make a real difference.

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