How to lower your payrolls and boost employee morale at the same time

Posted by Jim Stroud

February 20, 2008

Wow! (Thought-provoking comments from INC.com) How many companies are there out there that could pull this off? Could you make your company so fun to work that people will accept lower pay and still stay? If anyone knows of a real-life example, I would love to hear it.

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Creating a great working experience can lower your payrolls and boost staff morale at the same time.

Think your employees are asking for too much money? If so, you may want to think about how you can motivate them without doling out more cash. It’s a simple thought exercise that can lead to some practical ideas on how to lower your payrolls and boost employee morale at the same time.

In my frequent interactions with the small-business owners who use our payroll service, employee compensation is a hot topic. The feedback I get is fairly predictable. Salary expectations for workers are too high or out of whack with reality. I hear that healthcare benefits and workers’ compensation insurance are huge expenses. To be sure, the costs of these benefits are dragging down small business profitability across the nation.

In these interactions, I often ask business owners whether any of their employees would work for free. I get a puzzled look in response.

“No, really,” I say. “If your employees were independently wealthy and didn’t need to work to make a living, would they work for you?”

You see, that’s the holy grail of employee compensation. Create a work experience that is so incredibly awesome that folks will work for you for less money than they might otherwise demand. Let’s say, for example, that you install a ping pong table and a pool table in the office. The ping pong table runs $500 and the pool table runs $2,000. You’ve just invested $2,500 in employee happiness. So, what’s your return on investment?

Now, suppose you’ve got 70 employees and you estimate that you can pay each employee $100 less per year in salary, simply because they love the idea of working at a place that encourages employees to have fun. Lo and behold, you’ve just turned that $2,500 investment into a $7,000 payroll savings, an annuity that pays out every year and pays even more as you grow your firm. Plus, there’s the added benefit of improved morale that hopefully will boost productivity and add an incremental bump to profitability. (That’s assuming you manage your employees well, and they don’t all stop working and just start playing games all day.)

READ: Paychecks Aren’t Everything