Should I give my team a pay rise?

Andy Clark 25.7.22

High inflation and the NI increase mean that your team's wages aren't going as far as they used to and their living standards are falling, so should you give them all a pay rise?

Most of us agree that it's a good thing to do, but we must be careful. You can only give away what you've got.

A pay rise will increase your break-even figure at a time when demand for your services and transaction values may be slowing and, once given, you can’t really take it back.

First consider what the impact of pay rises will be on your profitability which may already be under pressure.

To do this, run the proposed salary levels through a Break-Even and Profit Planner (PB Members can download an excellent version of one in the scorecards section of the Club) and carefully consider -

• How much will pay rises decrease your bottom line by if your sales stay the same?
• How much will pay rises increase your break-even by?
• How much will you have to increase your sales by in order to maintain the bottom line at the same level and how do you intend to go about achieving this increase in these challenging times?

If pay rises are too risky an option right now, consider giving a monthly bonus instead. It should be based on a fixed percentage of sales above a threshold, calculated weekly and paid monthly.

This gives you the ability to pay extra when you can afford to and to have regular discussions with your team about how they can influence profitability and hence, how much bonus they receive.

PB members, you have a great tool for this in the Bonus for Growth system.