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  • Writer's pictureTerry Dockery

Pay Your Team Now or Pay More Later

Personnel costs are the greatest expense for many businesses. Of course keeping personnel costs in balance is an important part of optimizing profitability, but this high cost can create a strong temptation to use an extreme "cost control" approach. 

This usually takes the form of paying the absolute minimum necessary to hire someone, and then giving them minimum increases over time. Here are some specific examples of this approach: 

  • Not putting compensation information in a job posting: "Money's important to us, but not to you, right?"

  • Asking an interviewee what their salary requirements are: "We'd like to pay as little as possible for this position instead of paying your fair market value."

  • Allowing salary compression for existing employees by not keeping their compensation commensurate with new hires: "We'd like you to remain loyal and engaged, but we don't want to pay you fair market compensation in return." 

The 3 main downsides of this approach are: 

  1. You're not hiring the best talent. Sure, often it's not possible for SMBs to match big company salaries dollar for dollar, but SMBs can provide other perks big companies can't (more on that another time). A team of A Players will win against a team of C Players every time--think the Atlanta Braves playing your son's high school baseball team. 

  2. You have high turnover costs (which can range from 1 to 15 times annual salary per employee). 

  3. With excessive turnover you lose your seasoned employees with valuable institutional knowledge to keep your business running smoothly and maximize financial performance. 

Bottom line: Create a compensation program that attracts and retains top talent to maximize long term financial results. You can pay your team now--or pay more later. 

Don't be a stranger: (770) 993-1129,

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