January 28, 2016

$14 is the new $10


Reno, NV from Rancho San Rafael Regional Park


Caution: This is a tough love article.

We live this every day. What does it mean? There is a lot of lip service out there about how local companies are paying good, competitive wages but we do not see it in action. We challenge every business owner in Northern Nevada to read this, share it with their colleagues and then immediately create a revised human resources strategy for 2016 that reflects the importance of this fact: $10 per hour as a wage will not keep your business alive much longer. Keeping cash versus investing in the workforce trades short-term security for long-term certain death. A real HR strategy should encompass two proactive components: 1) Know the marketplace to begin with; and 2) Anticipate and stay head of the curve. At minimum, the wage should be $14 per hour for your least-skilled jobs. If you have not reached this level of pay, you're already behind the curve.

Federal minimum wage is $7.25 per hour if insurance is offered, and if not, then it's $8.25. Neither number is a relevant wage for our community: 1) The cost of doing business is higher; 2) the cost of living is higher; and 3) therefore, we have to increase wages. This is not in any way intended to open up a political discussion. This is pure economics – huge demand and less supply. If you want to do business here in the near future, and cannot get your mind about why this is true, then go play ostrich somewhere else. Here's why:

COLA is irrelevant: Gone are the days of no pay raises or minimal cost-of-living adjustments. In 2016 you should plan for a 3 to 6 percent pay increase across the board – maybe even higher for key employees. You do not want to lose your employees to the new companies moving to town … and a lot are coming, and your employees are being recruited.

Ignoring the herald: EDAWN (I am on the board) has been talking about this for years, recommending that the companies should pay at minimum $12 per hour (too late for that! It's now $14!). When companies pay employees $10.50 per hour they will get marginal employees who will not stay long-term. In the past, paying 50 cents less per hour than a competitor may have worked, but at a $3 difference, people will leave in droves because even Amazon pays between $14 to start and construction is paying $16 per hour to hammer nails. That adds up to $6,000 to $8,000 in more pay annually – too much money to leave on the table.

At The Applied Companies, we made a non-budgetary wage adjustment earlier this year to make sure we are paying certain percentiles, beginning at the 75th percentile, no matter what the position or level. This is a proactive strategy to prevent migration for the "grass is greener over there" employees who would move for a $3-per-hour difference. We have been ahead of the curve all along.

As CEO, I can truly say that we have not lost anyone over a money issue. How can you guarantee that you've planned well enough to say the same at the end of next year? Will you decide not to be a dinosaur that paid $10 per hour in 2016 and then became extinct in 2017? Only the fossil record will show the truth.

Jim Annis is president/CEO of The Applied Companies, which provide HR solutions for today’s workplace. Celeste Johnson, Applied's COO, and Kerri O'Neill, staffing manager, contributed to this article.


Read article in the RGJ here.

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