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Do the Math: The Price of Underpaying Employees

You've probably heard the old saying, "You get what you pay for." And when it comes to your employees, that's definitely true.

If you're not paying your employees a fair wage, you're not only doing them a disservice, but you're also doing yourself a disservice. When it comes to hiring and retaining the best talent, you simply can't afford to skimp on pay.

So, what's the price of underpaying your employees? Well, let's do the math. Below are some of the costs you'll incur if you don't pay your employees what they're worth.

The Moral Argument for Fair Wages

It's simple math: if you don't pay your employees a fair wage, you're going to end up costing yourself more money in the long run.

When employees are underpaid, they end up forced to work multiple jobs to make ends meet, which means they're not able to focus on their work at your business. This leads to lower productivity, less creativity and decreased morale. In the worst-case scenario, employees might even leave your company for a competitor that offers them a livable wage.

Bottom line: it's just not worth it to underpay your employees. Pay them what they deserve, and you'll be rewarded with better work output and a happier, more productive team.

The Economy’s Effect on Wages

Don't get us wrong, we're all for businesses making a profit. But when it comes to how you compensate your employees, there's a tipping point.

It's no secret that the economy has taken a hit in recent years. And that has had a direct impact on wages. In fact, since the recession began in 2007, wages have actually decreased by 2.8%. That may not seem like a lot, but when you're only making $10 an hour, it can make a big difference.

And that's why it's so important to pay your employees what they're worth. Sure, you may be able to find someone to do the job for less, but at what cost? When you don't pay your employees enough, you're not just hurting them—you're hurting your business as well. Lower morale leads to higher turnover rates, which costs money in terms of both recruitment and training. Not to mention the fact that your bottom line takes a hit when you have to replace good employees with bad ones.

So do the math: the price of underpaying employees is simply too high. Pay your team what they deserve and see the positive effect it has on your business.

What Small Business Need to Know

When it comes to paying your employees, it's important to do the math. That's because the cost of underpaying your staff can add up in a hurry.

Here are just a few ways that underestimating the value of your employees can cost you:

1. Low employee morale: When employees feel undervalued, it can lead to a toxic work environment and low morale. This can impact not just productivity, but also the quality of your product or service.

2. High employee turnover: When your employees aren't happy with their pay, they're more likely to leave. This can be costly and time-consuming, as you'll need to spend time and money recruiting and training new employees.

3. Poor customer service: A staff that's overworked and underpaid is more likely to provide poor customer service. This can lead to lost business and damage to your brand reputation.

It's clear that paying your employees fairly is not only the right thing to do, but it's also good for business. Do the math and make sure you're paying your team what they're worth.

How Underpaying Affects Employee Morale

When you’re not paying your employees enough, you can bet that morale will suffer. Everyone needs to feel respected and valued in the workplace, but when their needs aren’t being met in terms of compensation and benefits, they’re likely to feel undervalued and resentful. This causes a decrease in productivity, resulting in lost profits.

It gets worse: when employees feel unappreciated and underpaid, they may start looking for another job. This means that employers will have to go through the costly and time-consuming process of recruiting and training new staff members. That’s why it is important to pay your employees fair wages and invest in employee development programs in order to ensure that staff morale remains high now—and in the future.

The Long-Term Costs of Underpaying

The long-term cost of underpaying your employees can be even larger than the immediate impact to their pockets. When people feel they’re being underpaid, it shows them that they’re not respected by their employers and that their contributions are not valued. This lack of appreciation can directly translate into lack of motivation at work and can have a lasting effect on employee engagement, loyalty and productivity.

The result? You could find yourself in a place where morale is low and turnover rates are high—leading to higher recruitment and training costs as you look for replacements for the people who leave.

On top of all this, underpaying your employees will likely do significant damage to your reputation—both within the industry and in the wider world. Your brand could suffer from a tarnished image, leading to fewer customers and clients, which would be more damaging in the long run.

Tips on How to Pay Employees a Living Wage

The sixth tip when it comes to paying your employees a living wage is to make sure you’re factoring in all the additional expenses associated with hiring employees who are underpaid. This may include things like additional taxes, higher insurance premiums, and other labor costs that can add up quickly if you’re not careful.

You also want to think about the impact on employee morale. If your team members feel like they’re not making enough money, it can lead to a decrease in productivity and job satisfaction. This can, in turn, lead to a decrease in the overall quality of work and customer service that your business provides.

Finally, consider how paying a living wage can positively affect brand perception and loyalty. People are more likely to shop at stores that pay employees well and take care of their staff—not businesses whose employees are struggling financially. Not only will this help attract potential customers, but also encourage relationships with existing customers and even encourage them to refer others due to their positive experiences with your company.


So, the next time you are considering whether or not to pay your employees a fair wage, remember this: it's not just the right thing to do, it's also the smartest thing to do. Not only will your employees be more productive, but you'll also avoid the costly consequences of underpaying them. Pay your employees what they deserve, and reap the benefits yourself.

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