Money matters to staff, yes, but not as much as you might think

In the current financial climate and with prices rising sometimes steeply, you might expect wages and benefits to be at the top of the list of reasons staff look for other work, or remain in their roles.

However, survey data collected last year by SGEi and Stickybeak found these ranked only fifth in terms of employee priorities. 

First and foremost, it is critical that workers are paid a competitive wage. For most, this means they are paid a fair wage for their experience, role and industry. 

Paying your employees a competitive wage is the price of doing business, and while paying lower wages might help your short-term bottom line, it will ensure your people are more likely to leave you, or at the very least will become disengaged or less productive – what the business media terms "quiet quitters". 

The cost of having to find, hire and train an employee is real, therefore underpaying staff is just not good business, at least in the long term.  

Other elements  

It is important to remember, as our survey shows, that paying top dollar does not always generate any assumed benefit. It also does not allow performance-based approaches to compensation, as money available to reward staff is all distributed via their pay. 

While people feel happier when they make more money, research over the years has suggested there is a point where additional pay does not correlate to a commensurate increase in happiness or satisfaction. 

Once wages are competitive for the role, responsibilities and industry, companies should prioritise elevating the employee experience, focusing on the many other elements we have identified in our research as important to staff satisfaction and engagement.  

Salary assessments 

It is important that organisations assess and understand what a competitive wage by position looks like within their industry at least every year, although we are currently advising companies to review remuneration twice a year. 

There are salary guides available for many industries and locations around New Zealand. However, when data is not easily available, we recommend working with your local competitors (I know that will be hard for some) and sharing payroll data so that you are all able to pay a competitive wage and can focus on other areas to create differentiated advantages. 

No one benefits when local companies engage in a wage war for talent because it is generally short lived. We have heard many stories of higher-paid new hires being let go as soon as economic conditions settle. 

Advice for employers 

Our first piece of advice when it comes to wages is to focus on labour rates, not economic rates, in terms of setting your scale.  

Next, don’t tie people's wages to tenure, which, based on our experience, is the preferred strategy in NZ. 

Giving people an annual wage rise without any consideration for competitive labour rates or performance criteria can quickly add unnecessary costs to your bottom line. 

Without any performance considerations, you could have some of your most average but tenured employees earning the most, which is not a strategy to attract younger people today.  

So, this might mean that you should tie your wages to performance – provided you have clearly defined performance criteria – which, again, based on our experience in NZ, is often not the case. 

Performance is defined by completing tasks or achieving goals against the values of the business. In other words, it is about “what” is being done and “how” it is being done. 

While many businesses say they are using performance-based criteria, the reality is people are given annual increases for tenure. So, we would argue that staff should be given wage rises when the labour market increases, which may be more often than an annual performance review.  

Performance rewards 

In fact, we would suggest not even tying wages to performance. We believe performance should be recognised with rewards, incentives, bonuses, raises and promotions. These are all things that can be easily modified based on the success of your business. 

Recognise that with a comprehensive reward system, you can ensure your top performers are out-earning their industry and location. 

Remember, it is easier to reduce bonuses or remove incentives when your company’s financial position is tight rather than trying to reduce wages. Your highest earners might also be your most experienced and best-performing workers.  

Wage pressures 

We know it is not easy right now to control wages when there is so much pressure from your staff to earn more in these difficult economic conditions. 

Hopefully these will ease this year and a wage strategy based around a competitive wage and comprehensive reward programme will allow you to easily keep your best people. 

Also, remember that money is not everything – as I have already alluded to in recent articles. 

The ways managers treat people – creating a positive and inclusive work environment, focusing on worker wellbeing, and being a trusted employer – are more important in attracting, engaging, and retaining your best talent.