Why You Should Never Underpay Your Employees?

Why You Should Never Underpay Your Employees

Running a successful business has a lot of moving parts. You need to operate a company, you need to grow your company, and then eventually ― you need to support your company.

We have over 15 people in our company. I can tell you that it does put a lot of pressure on us to lower the human resources cost. This pressure rises whenever we are unable to hit our monthly income goals.

If we don’t make any profit, it puts pressure on us to pay our employees, while keeping an eye on the future.

This is why, whenever I hire someone, I take my time hiring to find a great deal. I’m always looking for someone who can do more work for less.

Who can be more productive for less?

Who can drive better results for less?

Well, that is at least what all of us as entrepreneurs aim for. Unfortunately, that’s not right and neither is that fair.

When underpaying happened among our clients

 

Let me give you a simple case study that came up about a month ago. There was a client who wanted to hire a professional through JobRack to do SEO marketing for them. I’m going to keep all the details anonymous.

underpay employees

In such case, if you hire someone for SEO marketing, you usually end up paying them between $5 to $7 an hour at the very least, depending on the kind of work they’re doing.

At least that is what I would do.

Why?

Because that’s something that will have an everlasting effect on my business. That is an important position within the company.

This client did end up hiring someone from the platform in the end.

Unfortunately, the employee, as we found out later, was only paid about $500 a month. That’s about $3.12 an hour.

Now, this is an SEO expert who is expected to be already well-trained with proven results within their career over the last 12 months or so.

They’re basically ready to kick butt.

They’re ready to go in and start getting results for this client.

Of course, the client chose to provide some SOPs and documents that will help this employee get started.

Still, expecting someone to just come in and do a lot of things for you, get results for you, can be quite difficult.

At that – $3.12 is not much, and this employee actually asked us (JobRack) if we have a better offer for them.

Why we shouldn’t underpay employees

 

Now this person wanted X amount of dollars and as I mentioned the client agreed to pay a little bit more than half of that X.

In this case, in an Eastern European country where this person was based, is lower than what they would be comfortable with.

Within the Philippines, if you pay someone $500 a month you can probably get someone at the very basic level.

However, within Eastern Europe, this number’s a little bit higher if you want good quality.

You get what you pay for.

If you’re going to spend peanuts, you’re going to get monkeys and that’s exactly true in this case.

underpay employees

Disregarding the fact that the amount that the employer decided to pay this employee is lower than the average in Eastern Europe, there are other reasons why you shouldn’t pay less to your employees.

If you are going to pay someone less than what they think they deserve, then you’re going to have a few problems.

 

Problem 1 – They won’t trust you.

They will feel that you’re taking advantage of them. Losing their trust will mean one of their most valuable motivating factors – trust.

At the very beginning of the relationship, they will feel that they got into this relationship because they were desperate for money. And you took advantage of it. You saw their weakness and offered them much less than what they think they’re worth.

Problem 2 –  They will always fidget and look for another job.

I’ve had this problem in past with people that I have chosen to pay less than what I thought was fair to them. I paid them less so they were always looking for other jobs.

In fact, I even found one of them doing other jobs while logging time for me so that was a big problem. This is the reason why we use a lot of time trackers such as HubStaff.

If they’re not getting paid well or enough, if they’re not completely happy in the job they’re doing for you, your employees will fidget and look for another job.

underpay employees

Problem 3 – They will not be passionate about what they’re doing.

Now you’re an entrepreneur. I’m an entrepreneur. We understand that being passionate is all about enjoying what you’re doing.

Let’s say if an SEO marketing employee enjoys what they do but still, they’re getting paid less.

Well… they’re not going to be passionate anymore.

They’re going to connect getting paid less with the job that they’re doing.

This basically means you’re actually going to ruin that job for them forever.

Next time they go for an SEO position, if they don’t trust their levels, if they don’t respect what they can do, they will feel that they will always get paid less.

This way you are actually creating a very limiting mindset in the mind of your employee – something I would never recommend you to do.

Problem 4 – You will miss out on talent.

Now that has happened to us as well. Trust me, we’ve done interviews with developers in the past where a developer was worth $25 we could only pay $15. At that point we’d say:

This is our budget. We can’t do more than $15. If you’re comfortable getting on board with that price, great. If not, maybe next time when we are ready for you.

They left, but on cordial terms because of the way we phrased it.

If you’re not ready to pay more, it is better to part ways with someone who values themselves much more than how you value them.

Ask them what is fair.

This actually might surprise you because sometimes they might give you a number which is well below their expectations. In that case just give them what they’re asking for anyway.

Or I give them some more and they’ll be happy for it. They’ll be happy that you paid them more than what they had initially asked you for.

Don’t forget to ask them what is fair and if you can afford it, pay them that.

If you can’t, offer a bit less. Then go ahead and explain that this is something you’re comfortable offering at the moment. However, do not rule out the possibility of increasing it further on.

underpay employees

Always remember – respect is a two-way street.

A few employees that actually got a job through JobRack, complained that their employers have promised that after a month or two they’ll get paid more.

But, that day never comes.

As employers, it is up to you to get everything in writing. It is your responsibility to make out a contract with them.

This way, any job seeker that comes and works with you is well represented, respected and appreciated.

If you can’t value what someone does and how much they wish to charge, they won’t value what you do either.

Consequently, they won’t really add any value to your business.

A working relationship with a job seeker, with an employee, is the same as any relationship in your life.

 

Don’t cut someone’s expectations in half just because you think that that’s what you used to pay your employees in the Philippines.

If you do that, you’re not really good for each other.

It is better to part ways before the relationship becomes toxic.

Would you date someone who only meets half of the expectations than what you want them to meet but they’re the only ones available right now?

Well, you probably wouldn’t. I think it’d be unfair for both of you.

underpay employees

Again, make sure when you hire someone, you pay a fair rate. You discuss with them what they’re comfortable with.

What you don’t want is for someone to be unhappy.

What you don’t want is someone to be distrustful towards you.

What you don’t want is for someone to look for other jobs while they’re working for you.

What do you think? Agree? Disagree? Have you had issues negotiating with an employee on salary? Share your story with us!