Should staff wages increase if turnover increases?

paddylonglegs

If my turnover for year 1 was 50k per month for example, and was achieved. Then turnover projection for year 2 was 70k and was achieved, and so on..... Should wages for core staff(who have been there from the beginning) be also increased as a larger turnover is achieved and the business is growing? Is this what is expected for long term employees?

jimmii

Guess it depends on whether you need extra staff to manage the increased turnover if not then I would be looking to give them a pay rise assuming you expect the turnover to stay at that higher amount. You could also just give a once off bonus that will reward people nicely for hitting the targets especially if you pay it as we approach Christmas.

knipex

What happens if turnover decreases ? Can their wages also decrease ? Also turnover may not be a reflection on profits..

I can fully understand why people on both sides may like to link an increase in profitability with an increase in reward but I am not sure I would do so in base salary as it leaves an employer in a very inflexible position to deal with any down turn. (base pay is protected and difficult if not impossible to revise downwards)

What may be more appropriate is to maintain their base pay (with appropriate annual pay reviews) and add a secondary "bonus" portion which can be paid annually. quarterly or even monthly which is directly linked to either the increase in revenue or profitability (I would prefer profitability!! what happens if you run a special or a promo which results in a significant increase in revenue but at a smaller margin,, having to continue to pay a bonus based on revenue may erode this margin to the point where it is no longer viable).. This bonus and how it is calculated needs to be transparent and open so there is no potential for argument or misconception..

This allows an employee to share in the rewards as a business flourishes but also ensures the employer has the flexibility to deal with any sudden downturn... (using your example above the employer increases their staff costs appropriate to a revenue of 70K what happens if there is a sudden down turn and revenue drops back to 50K ?? The employer still has the staff overhead associated with the higher revenue limiting his or her options on how that can deal with the problem (in practice probably only leaves the option of redundancies)..

Graham

paddylonglegs wrote: »

If my turnover for year 1 was 50k per month for example, and was achieved. Then turnover projection for year 2 was 70k and was achieved, and so on..... Should wages for core staff(who have been there from the beginning) be also increased as a larger turnover is achieved and the business is growing? Is this what is expected for long term employees?

Have these staff shared the pain of growing the business? Are they currently paid below market rate or have they gone the extra mile to help the business grow?

The danger with a defined bonus at a specific time of the year is it becomes the expected norm very quickly. If ever you find yourself in a position where you can't/shouldn't pay a bonus, the negative effects can be dramatic.

All that aside, a bonus is a good way of recognising staff contributions to your business. It just needs to be considered carefully.

Victor

A few points:
* There was a big problem during the boom that base incomes were increased instead of profits being shared. Profit sharing gives staff a reason to contain costs and improve revenue.
* Productivity - have revenue and profits increased by a greater % than the % increase in the number of staff?
* If staff were taken on at €X/hr to do tasks at a certain level (quantity or quality) and more is now expected of them, then they will expect better pay, e.g. if you employ a security guard and then expect him to do porter / reception-type duties and has a more intensive day, then he might more pay. Likewise if a shop goes from quiet to constantly busy.
* Seniority - presumably, some staff are needed at a supervisory level. Promoting suitable longer-serving staff gives them a sense of being valued and respected. It gives newer staff the prospect of getting promoted also. However, be careful to weight merit higher than seniority - no promotions simply because you have been there longest.
* Be careful to not be overly generous and create unrealistic expectations.

IpreDictDeatH

An increase in wage should be aligned with an increase in work/responsibility. Unless somebody gets a promotion id be very wary of automatically increasing wages with an increase in turnover. Turnover doesnt really relate to the health of the business. Your role as a business owner is to create a healthy profitable business, not to keep your staff bankroled. Its important to pay a decent wage and keep staff happy but it should be seen as an overhead not as a social responsibility on your behalf.

€70'000 a month, wouldnt that be nice

L.Jenkins

I would agree with profit sharing as an incentive. Would others also consider a small percentage wage increase based on expected inflation, say 1 - 5% increase year on year for core staff.

knipex

Certainly an annual pay review should be part of any dealing with staff. I would tend to agree on a percentage pay increase but it shouldn't be just linked to inflation. IMHO it would also have to be linked to the performance of the company and also the performance of the individual staff member.

If you have one individual who is consistently exceeding expectations, going that extra mile etc then I think that they should be rewarded accordingly. They certainly shouldn't be rewarded similarly to the individual who barely meets expectations..

Over the years I have seen many such individuals and the commonest response was to promote them, irrespective of their ability for the role into which they were promoted or their personal wish to be promoted. Their has to be another way of rewarding them and that can be reflected in a bonus or pay but talent and hard work should be rewarded accordingly or you should be prepared to loose that individual or see their motivation suffer.

relaxed

paddylonglegs wrote: »

If my turnover for year 1 was 50k per month for example, and was achieved. Then turnover projection for year 2 was 70k and was achieved, and so on..... Should wages for core staff(who have been there from the beginning) be also increased as a larger turnover is achieved and the business is growing? Is this what is expected for long term employees?

Turnover is for vanity, profit is for sanity.

If bottom line profits are increasing then paying core staff a high wage might be prudent to keep them in place.

I'd go for a profit sharing bonus based on performance and attendance etc. rather than just pay a fixed rate to everybody.