3rd July, 2018
Thanks to recent legislative changes, money is going to be less of an incentive when hiring new people. How does that work?
In New Zealand, there are two major workplace labour changes coming. Businesses do not yet have their heads fully around how these changes will change hiring.
It’s a one-two punch.
One these changes are increases to the minimum wage.
The New Zealand Government has pledged to raise the minimum wage to $20 an hour by 2021. The current minimum wage is $16.50, a relatively recent increase of 6.5 percent.
I don’t think that business owners have mentally got their head around the reality that the new ‘entry level’ full-time salary will be nearly $42,000 a year – and that they’re going to need to adjust all the salaries in their business to keep role relativities intact.
People who aren’t on the minimum wage are going to start to see wages go up below them.
For example, let’s say your team leader is on $40,000 and they’re managing four people on the minimum wage.
That means that by 2021, the manager could be making less than their subordinates, so to keep them happy you may need to increase their wage to keep the relative gap intact.
But that may not be so easy.
The Government has also launched a working group to help implement ‘Fair Pay Agreements’.
These are sector or industry-wide labour agreements, which almost certainly would go beyond the basic provisions of minimum wage increases.
While is isn’t quite a return to the ‘national awards’ regime of the 1970s, once implemented, employers will have much less latitude in what they pay their people.
I think that this will cause many employers – who might have been considering doing something innovative with wages and salary in their business – to simply park the idea and take a ‘wait and see’ attitude.
Why bother putting an elaborate wage incentive plan in place, if a Fair Pay Agreement will come in over the top anyways, and dictate to you what your people are going to be paid?
Employers will make wage increases for people near or at the minimum wage, because by law they’ll have to.
But those currently above the minimum wage will likely see their increases move more slowly, as the employer tries to absorb the reality of the new total wage bill for the business.
It will create a ‘relativity squeeze’ – pay differences for different jobs will get pushed closer together, creating the possibility of discontent in frontline teams.
There will be smaller actual pay differences between roles – so how do you keep that team leader motivated to take on that extra responsibility?
Employers will need to find other, non-salary ways to motivate and compensate that team leader.
The traditional way to get (and keep) better people is to simply pay them more – but with employers’ wage bills about to go up and less flexibility around wage structures, this may not be possible.
So, you’ll need to start thinking about non-monetary incentives which will make you and employer of choice – and that starts with thinking about your business as a brand.
It’s not just something for the corporates – it’s far more important for a smaller employer than a larger one.
Smaller employers will feel the squeeze of the changing labour laws more acutely.
They will need to build their reputation as great employers in order to attract workers in an environment where wage difference is less of a factor than it is today.
So start thinking about things like including time off to work on community projects, staff trips, opportunities to learn and develop new skills – there are a myriad of ways to engage and motivate your people.
Those things can cost a bit of money, but things like providing more work flexibility (with a little bit of management) won’t and will make you an employer of choice.
Study after study shows that flexibility is the benefit most highly valued by people. Everyone has interests and needs in their life outside of work.
When their employer can recognize and support these needs well, it feels like a wage increase to the employee.
In fact, employees will often mentally trade salary in exchange for more flexibility – if it’s relevant to them.
This can be as small as being able to accommodate someone’s school pick-up needs by letting them start earlier and leave earlier.
It can be as elaborate as a flexible benefit plan where each person can choose the benefits most relevant to them from a menu of available benefits. There are countless possible variations.
If you start building your employer brand today, your business will be much more ready to cope with the changing labour landscape tomorrow.