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 with substantial salaries—both through competitive initial wages and regular increases.
Larger salaries provide employees with a stronger motivation to remain with the organization, resulting in better retention rates , lower turnover costs , leading to a more stable workforce over time, he explains. Grant views increased wages as an "investment" for businesses.
"Providing individuals with increased salaries, particularly offering high compensation—even some might argue extraordinarily generous pay—is seen as an investment in their motivation and loyalty," Grant told Fortune .
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Gallup estimates That replacing an employee might cost a firm as much as double the worker’s yearly wage—significantly higher than the typical 3.8% annual increase expected in 2024, according to figures from a nonprofit research organization. The Conference Board Nevertheless, frequently changing jobs might not result in a considerably higher paycheck. As reported by 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 an even slighter more significant boost of 4.8%.
Adam Grant. Image captured by Brian Stukes/Getty Images
"As companies offer compensation at the higher end of the market spectrum, this leads to exceptional dedication, since individuals realize that replicating such salaries elsewhere is not straightforward," Grant noted.
Staff members earning greater incomes are likewise more motivated and engaged , as reported by the compensation website Figures HR. According to Gallup Higher levels of employee engagement correspond to 78% fewer instances of absenteeism, 18% greater productivity, and 23% increased 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 recruitment rate across all sectors stood at 3.4% in January , a nadir over the last ten years, whereas job listings were down 8.6% In December as compared to the corresponding period last year.
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