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The impact of competitiveness between contractors because of the difference in pay scale can be significant. Some contractors pay rock bottom salaries and others pay above union scale. Pay top dollar and get highly skilled, motivated, educated and trained employees. The result will be an increase in labor productivity.
If you pay a low salary, your better employees will leave to do the same work somewhere else or go to work on their own. Only the poorer, less motivated and less able employees will remain to work for you for lower pay. In addition, you may expect code violations, increased supervision requirements, and an increase in lower productivity.
To expand your work force, make an effort to hire quality people, pay them accordingly, and provide them with proper training. Make it possible for them to learn their trade or enhance their skills so that they can first increase their productivity, and then qualify for advancement. Many of today's successful contractors have an apprenticeship and continuing training program for their employees.
Overpaying, however, has a drawback also. You can be less competitive in the price you charge for the product or the service that you are offering. In business, every dollar spent must produce a positive return and that includes dollars invested in wages and salaries.
Compensation consists of more than salary (dollars):
NOTE: For other closely related topics, be sure to review the sections on Company Policy (#78), and Hiring and Firing (#81) in this series of articles on Labor Management.
Mike Holt's Comment: This newsletter was extracted from my Business Management and Management Skills' Workbook. Watch for our next newsletter, and as always, we encourage your comments and feedback. Send us your real-life experiences. Please respond to Barbara@mikeholt.com.
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