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How do you adjust wages in your retail store when a box store comes to town?
There was a wage analysis done, and I am of the belief that adjustments will need to be made to the rates of the staff to ensure that they are not recruited. Does anyone have a formula that would help calculate an adjusted pay rate with consideration to contribution, years of service, and skill levels using the data I received as "average" or "medium" rates in each of the different job descriptions for the business?
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2 Answers
I'm not sure where you are located; but in Canada, we have the National Occupational Classification system that is very helpful in determining average wages in specific categories of work. You can also search on the web for some salary information but some of those sites will charge you. Do you know what the wages are that the big box store is offering and how your salary might differ? Do they offer benefits that you do not or can not? What type of shifts do your employees work and are they more likely to be full time versus part time? Many of the big box stores will offer benefit packages, as an example, but rarely hire full time or provide employees with enough hours to actually be eligible. Find out as much information as you can about your potential competition before you make any changes. Also, think about things besides wages alone. What are some of the 'perks' of working for your company?
In terms of formulas for years of service, most places I have worked put their employees on a scale within their respective job classification. If an employee stayed in the same position for 5 years, he or she would have reached their maximum rate of pay with the exception of any bonuses or cost of living allowances that the company provided for. The only way he or she could earn more after that period of time, would be to change jobs. I don't know of too many organizations that differ from that. So, years of service caps at some point. If you wish to implement a bonus system to reward your high performers, you can certainly do that as an option.
Hope that helps somewhat.
By the way, have you ever done a SWOT? While I know they are somewhat old school, they still serve a valuable purpose and may assist if your company is going to face some new competition and you are concerned about retention.
Jason,
In my experience, the most consistent and equitable way to do this is by determining what entry level pay should be by position. Since you are in a retail environment, I assume you have customer service associates, team leaders, assistant managers etc. Determine what the new entry level wage (if you were hiring someone new) would be for that position and then adjust each individual accordingly. If you determine that based on your research customer service associates should now be hired in at $10/hr, but you have several making $8.50 you know that at a minimum you will need to bring those employees to $10. There is nothing that says you have to make further adjustments based on tenure (if they all left and went to the new retailer, chances are good they would all be hired in at the same rate), but if you wanted to, the easiest way to do that is to determine a set amount per year. For example, anyone with 1 year of tenure would get an additional $.30, 2-3 years would get $.50 etc.
Across the board wage adjustments based on competition are typically not a good time to take performance into consideration. Keep in mind that you are adjusting wages on the position not the person.
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