How To Talk With Your Employees About Hourly Wages

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Everybody wants a raise. Everybody wants a raise sooner. Everybody wants a bigger raise. Hey, you're the boss, right? If you're a manager, everybody under you thinks you have the keys to the money kingdom. If you're the owner, I have news for you. Everybody who works for you thinks you're rich and just too stingy to give raises. Does this all sound about right? Am I close? Do you ever get that kind of vibe from employees?

​Let's Take A Receptionist In Your Company As An Example

In 2014 (last year for published statistics), The US Bureau of Labor Management reported the median average salary for this position was $26,760 or ​$12.87 an hour. The best paid people in the profession earned $38,590 ($18.55 per hour) while the least paid earned $18,600 (less than $9.00/hour). These are national averages. You can look this up - as I did - in about 2 minutes on Google.

These are very helpful numbers to know. Wouldn't you say?​

Next, take a run through the local classified ads (online and off) for your area and find out how much the market is paying in your area.​ Call up a few other places and just ask them what the starting wage is? Let's say with a little research, you can hire a seasoned receptionist - not the top tier - for about $14.00 an hour to start. Let's say your staffer is pretty good and you're paying her about $13.50 an hour and has been with you for about 6 months (normally when the first itch starts).

So, on an annual basis, your employee is earning a little over $28, about $1,500 over the US annual minimum and ​about 10K under the annual maximum.  So you've got a some wiggle room here depending on your local marketplace and your  judgement and feelings about the performance you are getting in return for the wages you're paying.

How Does A Person In That Position Contribute To The Company?

One of the major challenges in this area is that​ the vast majority of employers (particularly small business owners) have no idea what a top tier receptionist does to earn almost 40 grand. Are there better skillsets? What kind of skillsets? Is the pay variable mainly market-based

Again, you might get some insight by talking to a few people in your same business in other areas. You could start to compile a research file of classified ads in your area for this position (or any position). Pay particular attention to the wages offered versus the list of skills that are required. You may even assign the research task to your receptionist. Talk about transparency!

​My feeling is if you are paying someone in that position around $9.00 an hour in any area of the country, you're in real danger of losing that person to a direct competitor or say...Burger King - which will pay better with comparable benefits and a food discount.

Let's Take A Quick Look At The Marketplace

Let's say you sell widgets for 10 in a box for $100.00. You're doing fairly well. Your closest competitor​ is selling the same lot for $96, but they often have timely delivery problems. Then there's somebody else selling for $120 and they're no better at it than you. Now you have a framework with which to discuss hourly wages openly and honestly with no drama, no trauma, no heavy emotions. I'll tell you how to do it.

In order to be competitive in the market (and continue to sell your products), you've got to keep your costs somewhere in line with the market or the playing field starts to tilt away from you and your company starts losing more. Both you and your employee both better be on the same page with this because it could tilt away from you. Remember, the all knowing, all powerful, all munificent OZ marketplace sets the rules and the cash allocation. 

Now, if you're a manager, you should know all these figures. If you're a business owner, you must know all these figures.​ As Marcus Lemonis always says in his show "The Profit," the numbers don't lie.

OK. Let's Bring It Back In

​Show all these numbers to the receptionist in front of you who wants a raise from $13.50 to $15.00 an hour. Even if this person is pretty good, $15.00 is out of the cost structure the market has set. If you overpay the receptionist, and the machinist, and the dockworker, then you've got a problem. 

You'll have to raise your prices in a way that your firm will not be competitive and will start to lose business. Then everybody and their families who depend on you and your firm for food and shelter could end up out on the street.​

The problem for your receptionist is that role is only worth $12.59 to $15.00 an hour in most places. That's pretty much best case. If your receptionist insists on $15.00 an hour, you can find a replacement just as good all day long at, probably, $13.00 an hour. It's a commodity job for the most part. And that's what, realistically, you would have to do as a good steward of your department or company.​ 

Remember the or your company does not set the wage range for any position. The marketplace does.

The basic premise for additional wages is the employee provides additional value to the company in some way to earn those added funds. Right? So, start to plot a future in which this staffer can start, little by little, day by day, to increase value to the company and receive incremental raises along the way. There's also got to be a clear understanding that this position is always going to be capped at X$.

So, Let's Go For The Win

​Here's a real life example. I had a young lady receptionist as a direct report to me in my department. Her pay was about - or pretty close to - the top end our company would pay. She was a very valuable employee who did excellent work. After our first conversation about a raise which was not very satisfying for either of us, I asked her for a couple of day to mull it over.

I dug through the company HR files and manuals and found an astounding benefit. ​If she took a certain type of classes (not jazz improvisation dance) and got the right grades, the company would reimburse her for up to 90% of the cost of the classes and her book expenses. I offered to write a letter of recommendation for her to get into the program - which she did. She had already started school and was overjoyed with this windfall.

​The Bottom Line

The bottom line of this is that paying wages​ to somebody to complete work tasks is, simply, a business transaction. Nothing more, nothing less. The restrictions are 1) your ability to judge talent and their future contribution to your business and 2) the restrictions on pay levels dictated by the competitive marketplace.

I've found if you start this kind of discussion and share your research file with your most serious applicants on day 1 (the first interview), this all tends to enable much easier conversations about the subject in the future.​

The Last Word

You know what is the worse course of action? Your company is losing market share and orders because of late deliveries, product defects and wrong orders, for example, and you don't share that with your workforce. You may believe you are being kind by keeping them in the dark. Nothing could be further from the truth. They need to know exactly what is costing your firm business and what they can do about it to make sure everybody prospers going forward.

​Play it straight with people. Be transparent. Be logical. Be kind. If you follow my methodology in this report, every single "raise" discussion in your business future will be a lot easier.

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