What would happen if businesses offered their employees the maximum wages they could afford?
According to psychologist and
best-selling author
Adam Grant suggests that from an employer’s perspective, it makes sense to compensate their staff as generously as feasible—through substantial initial salaries and regular increases.
Larger salaries provide employees with a stronger motivation to remain with the organization, resulting in
better retention rates
,
lower turnover costs
, and a more stable workforce in the long term, he says. Grant frames higher salaries as an “investment” for companies.
“Providing individuals with increased compensation, especially offering high wages—or as some might argue, extraordinarily generous pay—is an investment in their motivation and retention,” Grant says.
told
Fortune
.
Related:
Seeking a Work-from-Home Position? A Recent Study Suggests It Might Be More Challenging Than You Anticipate.
Gallup
estimates
That substituting an employee might cost a firm as much as double the yearly wage of the staff member — significantly higher than the average 3.8% annual increase expected in 2024, as per information from a nonprofit research organization.
The Conference Board
Nevertheless, frequently changing jobs might not result in a substantially higher paycheck. As reported
federal wage data
This week, individuals who remained in their positions observed a salary hike of 4.6% in January and February, whereas those who changed jobs enjoyed a somewhat more significant boost of 4.8%.
Adam Grant. Image captured by Brian Stukes/Getty Images
“When organizations pay on the top end of the market range, they end up with unusual loyalty, because people know that they can’t easily replicate the salary that they’re getting elsewhere,” Grant added.
Employees with higher salaries are also more
motivated and engaged
, per compensation site Figures HR. According to
Gallup
Higher levels of employee engagement correspond to a 78% reduction in absenteeism, an 18% increase in productivity, and a 23% boost in profitability.
Meanwhile, a new
Harris Poll survey
According to a report from Bloomberg News released last week, 75% of employees believe that employers hold an advantage in the current job market. The data also showed that the hiring rate across all sectors stood at
3.4% in January
, a nadir over the last ten years, even as job listings were
down 8.6%
In December as compared to the corresponding period last year.
Related:
‘Nobody Gets Paid Like Before”: Career Switching Yields Less Advantageous Compensation, Says Recent Statistics
