06/25/2025
EMPLOYEE RETENTION!!!!
I was speaking with a business owner last week about discontent among her employees. Her solution is a tough one, but a necessary one. She needs to adjust her companies compensation structure.
The world has changed. Just a handful of years ago it was easy to find and retain a high quality skilled work force in her market when she was offering starting rates of $15 to $17 per hour. Now, with her local fast food restaurant offering a starting rate near $20 per hour, it is very difficult for her to bring in quality employees for under $25 per hour and nearly impossible to retain them.
The old rule of thumb used to be that the starting rate for skilled workers should be between 1.5 and 2 times minimum wage. How does a small business survive hiring at a rate between $30 and $40 per hour? Not an easy question.
The days of skilled employees being satisfied with a fifty, sixty or even seventy thousand dollar jobs are behind us. A recent study in my local market says that a single individual requires $75,000 per year to live a comfortable lower middle class lifestyle. It sounds high, but when you figure that the average rent in this area is $1,500, when you combine that with car payments, insurances and utilities, they've already used up almost 2/3 of their net take-home pay.
So what does it take to hire and retain quality skilled employees? Of course it depends on your market, but rest assured that you will have to offer a sound path for growth beyond just starting wages that meaningfully exceed the local minimum wage offered to unskilled workers.
In the aforementioned situation, we had to readjust her pay scales with a new starting rate of $24 with growth paths for employees that exceed expectations to achieve an hourly wage in the mid to upper 30's by year 5 along with generous benefits packages. A lot of hard choices come into play to accomplish this, but not setting your business up for employee retention success will only lead to stagnation at best and business failure at worst.
