How Much is Enough?

In working with countless employers over the years we have had opportunity to have numerous discussions about the touchy subject of wages. Of course, employers want to get the best employee for the lowest wage, however, reality says that you have to be competitive to attract and retain quality employees. In some cases, employers do not have consistent compensation structures, which can lead to a discrepancy and even backlash between employees. Although it is frowned upon, don’t be surprised if your employees discuss their wages and compare with their co-workers and other industry colleagues. If you are finding that you have to adjust wages to attract new employees, make sure you are making the same adjustments for your long term, loyal employees.

With all the buzz on the topic of inflation, we can’t deny that wages should be increased to keep up with the cost of living. However, it is a bit tricky to know how much to adjust when inflation will likely settle down, whereas wages tend to stay once raised. According to Forbes, “A basic principle of labor economics is that wage increases are “sticky,” meaning they tend not to go down unless significant structural issues are present. Because wages are difficult to reduce if markets deteriorate, companies are slow to raise wages before determining long-term implications.”

Not being an economist, I won’t speak to the justification of keeping wages lower than inflation in order to control the “'wage-price spiral.' This economic phenomenon would see workers bid up their wages to raise their purchasing power and businesses pass those higher costs onto consumers — thereby feeding the spiral.”

However, people still need to live in ways that are reasonably consistent. This is reflected in the living wage recommendations put out annually by The Alberta Living Wage Network. The 2022 Lethbridge living wage is $20.30/hour, which is up from $19/hour in 2021. For context, “the wage works out to the hourly, full-time wage needed for both working members of a four-person household to earn for a “basic level of economic security” in their community.”

While we can’t know the long term outcomes of our economic situation, having a consistent compensation structure and plan in place shows you value your employees and treat them fairly. Compensation structures should take into consideration the cost of living measure (such as the Consumer Price Index), the competitive market (we are currently in a “war for talent”), economic indicators (such as the living wage), and internal equity (to adjust for distance between the ranges and not have too much disparity). In this structure, you should tie raises to scheduled reviews, measurable objectives and/or length of employment. This prevents employees from holding too much power over you. Also, make sure you are up to date with Employment Standards for over-time, holiday and vacation pay.

If raising salaries is not in your budget or within your control, consider other ways to keep employees satisfied and recognized such as flexible hours, bonuses, stock or profit sharing, employee benefit plans, employee experiences and creating a strong culture.
  
If you need guidance or advice on suitable wages for a given position, you can refer to the ALIS website or call Hire Standard to discuss. We can also conduct salary surveys or compensation evaluations on your behalf.