Factors to consider before raising pay rates
There are several reasons why you might be looking to raise the pay rates your company offers as an employer in the manufacturing industry.
Whether attracting and retaining the best talent, boosting morale and productivity or staying competitive with other companies in your industry is your priority, it's essential to be aware of the factors that could affect your decision.
1. The state of the economy
An economic downturn can make attracting and retaining qualified workers more challenging, putting pressure on companies to offer higher wages. This is especially true for industries that are experiencing a shortage of workers, such as manufacturing.
While keeping the above in mind, you should also consider inflation and the rising cost of living, as well as how much such economic conditions impact the industry.
Note that global consultant Willis Towers Watson reported that 96% of employers had increased their pay and compensation packages in response to a tight labor market.
2. The current market price for the worker
The market price of a specific type of worker can be a good indication of what the industry considers the average wage.
According to the U.S. Bureau of Labor Statistics, the mean annual wage for production workers in the manufacturing industry is $43,530 across all states and the District of Columbia.
If you are trying to attract new talent and hold on to your current employees, your pay rates should be competitive with other manufacturers in your region or state. Otherwise, you risk losing your workforce to a competitor with higher pay rates.
3. Employee retention rates
The retention rate is a good indicator of whether you are offering competitive pay. If you have high turnover rates, it may be time to review your wages and benefits package.
Moreover, if you can keep your turnover rates lower than industry standards, this is a sign that your pay rates are competitive.
4. The company's financial situation
If you plan on offering competitive pay, but your company is not generating enough revenue to support it, then you need to figure out why and find ways to increase revenue.
Equally, if your company is generating more revenue, but workers' pay rates have stayed the same over the years, then you may be able to afford to increase wages without hurting your bottom line.
If you want to pay competitive wages, you're off to a good start by doing some research. Although it can be time-consuming, it's worth the effort. After all, you'll be able to offer your employees a better quality of life and make them more likely to stay with you.
However, suppose you want to maximize your company's profits, too. In that case, it's important to consider the bigger picture and all of the factors that are likely to affect your decision-making process before committing to raising pay rates.