In Focus: Do Wage Hikes Resolve Recruitment and Retention Problems?


Employers use compensation as a tool to attract and retain a talented workforce, but do wage hikes always help resolve staffing issues? The answer may depend on how much money the business is shelling out.

Silicon Valley Farm's $3 an Hour Increase Ended Labor Shortage

The country's largest garlic farmer, Christopher Ranch in Gilroy, Calif., said it solved its labor-shortage issues by raising wages in advance of mandatory state increases. Raising its lowest hourly wage from $10 to $13 made the farm more attractive for workers to carpool into pricey Santa Clara County—home of the Silicon Valley. The farm said it now has 150 applicants on its waiting list. (Los Angeles Times)

Turnover Dropped After Mental Health Facility Raised Wages

A state-run mental health facility in Yankton, S.D., said it has struggled for years with recruitment and retention efforts, but turnover dropped significantly after a pay raise was provided in 2016. (Pacific Daily News)

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Recruiting Firm's Revenue Grew After 33 Percent Pay Hike

The founder of Pharmalogics, a biotech recruiting firm in Quincy, Mass., raised some base salaries from $37,500 to $50,000 and added yoga, workout classes, and healthy food and beverages to the mix of offerings for employees. "Revenues and the number of employees have grown by almost 50 percent, profit margins have remained steady and retention rates have doubled," The Boston Globe reported.

Longtime Employees Quit After Company Increases Starting Pay

The inspiration for Pharmalogics's wage increases came from Gravity Payments CEO Dan Price, who raised minimum wages at his Seattle-based company to $70,000 in phases starting in 2015. After Gravity's wage hike, two longtime employees quit, saying they thought the raises were unfair to traditionally higher-income earners. A critic of the hefty increase said across-the-board raises should be market based and shouldn't alienate higher-paid staff. (USA Today)

Google Lost Employees by Paying Too Much

Google employees who were early members of the technology company's self-driving car project were paid large bonuses. A multiplier was used to calculate incentive pay, which resulted in huge payouts after certain milestones were met—and some employees received multimillion dollar rewards. When the project wasn't progressing in the way some employees wanted, they left to start their own autonomous vehicle companies, in part because they were no longer financially dependent on their employer. (Bloomberg)

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