Benefits and Compensation

Should You Offer Employees More than the Required Minimum Wage?

Currently, as per federal law, employers are required to pay employees at least $7.25 per hour, although many state laws (and some cities and counties) have different minimum wage requirements. However, many federal lawmakers and citizens want to increase the federal minimum wage to $15 per hour because they claim that workers making less than that are still living in poverty and are unable to provide for their families.

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Souce: Zerbor / Shutterstock

Whether the federal minimum wage is increased, the question is: Should your organization pay its employees more than the required minimum wage?

If your organization has many hourly employees, you’ll want to consider the information outlined below when answering this question.

Benefits of Offering Employees More than the Minimum Wage

If your organization offers higher wages than its competition, it will attract more loyal and hardworking employees, who will want to stay with your organization long term, thus decreasing turnover costs over time. Your employees will also be more willing to recommend your company to others for employment opportunities, and you can be more selective in the hiring process and hold employees to higher performance standards because you are more competitive.

In addition, employees making higher wages will possibly be more productive and engaged at work because they won’t be as distracted with personal finances and challenges, and they won’t have to get a second or third job for additional wages, leading to fewer scheduling conflicts, as well.

Potential Drawbacks of Offering Employees More than the Minimum Wage

Some organizations may not generate enough profits to offer wages that are above the minimum wage and could end up filing for bankruptcy or going out of business if they do. Some employers may have to terminate some employees before being able to offer their current staff higher wages, meaning some workers would be required to work more hours and handle more tasks because there would be fewer coworkers to share in responsibilities, which could ultimately lead to lower employee satisfaction and more stressed-out workers.

Potential Solutions for Offering More than the Minimum Wage

If your organization can genuinely offer its hourly employees more than the required minimum wage, consider boosting hourly rates in small increments over the course of a year or two, such as increasing pay 25 cents per hour every 3 months. Or, maybe employees who reach a certain tenure could receive an additional dollar per hour, say, for each 2 years they remain at your company, for example.

But whatever you decide to do, it is important to remember that you don’t necessarily have to make steep steps right away, meaning you don’t have to jump from paying employees $7.25 per hour to $15 per hour overnight—that is, until it’s mandated by the federal government.

At the end of the day, as you consider your hourly employees’ wages, be sure to keep in mind the above information, and consider the inevitability of the federal minimum wage’s eventual increase to keep pace with inflation.