Question
I am the owner of a small cab shop, and I have one fulltime employee who has been a great asset to my business. I trained him in my shop over the past 8 months and he has been a good, hard worker that stays busy, and he even tries to make himself better at the different jobs I give him to do. I would have a very hard time replacing him with someone at his skill level that I trust. Trust is very important with employees - both ways.
I pay him average pay for above average work, and he hasn't asked for a raise, but the longer I know him, I don't think he would. Should I just give him a raise? How much? Wait till he comes to me? He seems to like his job, and good jobs are hard to come by here. He tells me all the time he has no desire to be self-employed; he just wants his 40/week and to go home. I don't give benefits, but do withhold his taxes and have worker's comp, etc. by the book.
Forum Responses
(Business and Management Forum)
From contributor A:
One of the largest costs in a business is the cost of training and retraining employees. You need to let him know you appreciate him and give him a raise. Do a little review and let him know you are happy how he takes initiative and improves himself and reward him. You should plan on raises either once or twice a year.
An ad may cost you $200-$2400 by the time you replace someone, then there is the cost of training him and the production you would lose while training him. If he is above average, then pay him above market rates.
$1 per hour is about $2000 per year. If you sell 200,000 per year, the raise costs you a small percentage of sales. If it took two months to replace him, what would the decline in productivity/sales/income cost you? If any of your vendors give you gifts, you may want to give them to him every now and then.
In 18 years of working for others, I tried to do my best, and was almost always the highest paid employee in the shop, getting there faster than anyone else. I never asked for a raise except once. When I didn't get it, I left.
As an employer for 10 years, I have never had an employee ask for a raise. I have always tried to stay ahead of the curve. I have never lost an employee I did not want to lose. It is a guessing game, but it is far better to reward and err on that side, than it is to fall short and lose this asset to your business. You don't have to go far to hear all sorts of employee horror stories.
My inclination is usually in line with contributor H's comment. If all is going well, the one year point is a good time to sweeten things up a bit. Your guy, however, has obviously done superior work and has an interest in his occupation. Those people are rare and you don't want to lose him. My concern would be this guy catching the eye of another shop owner and them offering him a deal he can't refuse. Also, he might not be interested in running his own shop, but I've seen situations where a person comes along with some capitol they need to invest and bankrolls a guy like yours. There's a shop near me where that occurred. A guy just like yours, who had no money or aptitude for the business side of this game, had an offer to do the 60/40 thing. Now, he runs the shop, an accountant keeps the books and pays the bills, and the investor spends a lot of time in Aruba. I'm trying to get this investor to adopt me :-).
It sounds as though your guy is a very good worker and you should let him know that you appreciate it. And, give him some money.
All employees are informed of this policy and when they think they have been doing well, they ask for a raise. I almost always give it to them, because employees know when they have been more productive. I have had employees that I knew wouldn't ask for a raise even though I thought they deserved one. The conversation went something like this:
(Me) Paul, if you asked for a raise I would give you one.
(Paul) That's nice to know.
(Me) All you would have to do is say "can I have a raise?" and I would give it to you.
(Paul) Okay.
(Me) Paul, repeat after me: "Will you give me a raise?" (Paul repeats)
(Me) Yes.
I try very hard to take care of my employees and to make them feel like they are important to me because they are. But just giving them a raise does not develop the kind of communication with my employees that I desire.
The relationship between your business and your clients is not the same as between your business and your employees. If you want to promote communication, I would think you would want to lead by example and initiate communication, rather than waiting for the employee to initiate it. What kind of message are you sending? If I was your employee, I'd guess that your policy was designed to take advantage of your employees to the greatest extent possible, pay-wise. To me, that's not a recipe for good communication, that's a recipe for employee-manager hostility and distrust.
My guys know from day one that if they want a raise they have to ask. I do not keep this a secret nor do I make this difficult to do. I have no way of knowing what an employee thinks unless they tell me. The key is to make it a non-threatening situation. They know if they have a problem or suggestion that I will listen and try to make things better for them but I do not try to guess what they are thinking.
I have never lost an employee that I wanted to keep. I treat my guys well. We play slingshot paintball at break, we go to lunch 2 to 3 times a month. I just bought a pair of $400 skis for an employee as a bonus right out of the blue. A couple of weeks ago I bought tickets to an NBA game for one of my employees and his wife, good one too. I have purchased wedding rings for employees that didn't have the money and let them slowly work it off.
I help my guys and they work hard for me. I have enough guessing to do with estimating and time frames of general contractors that I don't need to play mind games with my guys; we are all on the same team. If they think they deserve a raise, they know they need to ask. If I think an employee deserves one, I will help him ask, but he will still ask.
This is a great idea! The only time these little chats seem to occur is when one party to the meeting is not getting his or her expectations met. There's often some stress associated with meetings like this, so people tend to avoid them till the situation
can wait no longer. At the same time, I've heard many people talk about what they are planning on discussing at the upcoming scheduled review. In every instance, they seemed to look forward to it. I'm going to take your advice. I think I'm going to start a once a month ten minute review program. But I'm going to have them review me.
Contributor T, regarding your implementation of a monthly 10-minute review of your performance by your employees, I have to say that I don't recommend it. I've tried this sort of thing in my previous life as a middle manager, and it didn't work well. Because:
1) Scheduled things like this tend to suppress dynamic, real-time communication.
2) Employee input tends to be more critical than constructive (I'm painting with a very broad brush here).
Now there are multiple other factors that could have been involved in making my past experience less than fulfilling (for anyone), not the least of which may be poor communication skills or management on my part that didn't allow for those meetings to be very productive. I guess I would suggest that if you want to implement something like that, make it quarterly or biannual, allow for more time, and maybe do it away from the shop.
I do not use bonuses for wages. I use them to show appreciation for extra effort. This does two things for me. 1 - does not lock me into paying a guy more than he is worth for years because he stayed late for a week to help get a project out. Lets me pay bonuses when I can and not when the calendar says I should. There have been many times when I didn't really have the extra cash to pay a guy a bonus right when I thought he earned it. But we are not on a bonus schedule - if they happen, they happen, and if they don't, you still get paid a fair wage.
I learned to stay away from the predictable raise and bonus. Typical problem... First Christmas they are pleased as hell with the bonus. Second Christmas they are hoping it happens again this year, and hope it's more than last year. By the third year, they have already spent the money before they even see it, and are pissed if we had a down year and there was no bonus. Nothing backfires worse that a counted on bonus that doesn't materialize.
Employees all think the boss makes too much, even if he's making less that they are. I learned not to get too personal, keep an arm's distance and just try to be fair. A small shop gets to be like a family, till the dollar enters the picture... then it's like the bratty kids fighting over the inheritance!
Peak performers get bigger raises. Poor performers get no raise, but have one chance to improve over the next three months. Raises do not need to be asked for. All things need to be predictable for staff, no surprises. Staff also need to know that the process is fair. No one should be making more money simply because they had the comfort and confidence to ask.
Someone suggested paying for some of the benefits, such as health insurance, instead. Figure out how much the employee would have received if you gave them a raise. Then, pay that much towards one of their benefits.
With that said, treating an employee with respect and showing appreciation when it is deserved is the best way to keep someone around and working hard. I think raises are the best way of showing that. Bonuses are another good way, but when they don't come, I believe it hurts morale if that is the only method for an employee to have an increase in salary. Pats on the back are good as well and let them know they are doing a good job, but that will only get you so far before they will walk.
For the couple of you who don't think raises are a good idea, why do you feel a person shouldn't be able to afford more year after year? If you're one of those that runs around in your fancy car and drives home to a big, fancy home, that's a hard thing to preach without looking like a hypocrite or being a tightwad. Yes, as a business owner, you should benefit from it, but don't deny your employees the privilege of being able to afford a little bit more every year. It isn't for you to decide how a person spends their money. In my opinion, if a person's salary has remained the same, or increased very little, over a number of years, it is time to move on. This is provided he feels he has improved in one form or another.
As far as benefits, they are nice to have and a necessity for some. Personally, in all the years I had good health benefits, I rarely used them. If I didn't receive good raises because of that, look at all of the money I lost out on over the years, not counting the money I had to pay every week for my portion of the benefits I never used. If you can offer good benefits, it is a nice perk for the employees, but don't include it as part of their salary increases. They will never be able to afford a nicer home or a newer car with that money.
Yes, employees' salary is a large percentage of the overhead. It is the cost of doing business. Without employees you can't run a business. If you have good workers, you will make that money back in productivity. I don't understand why that is such a big deal.
Sorry if this sounds like I'm taking it personally. I'm not really, but with being an employee up until last year, it does hit a bit of a nerve. I left my last job and career because of exactly that reason. Companies today, more than ever, seem to be taking advantage of employees. Raises are minimal and benefits are getting leaner. As an employee, people are lucky to be able to keep their head above water any more, let alone get farther ahead. The cost of living effects everyone, including company owners. But owners have the benefit of increasing sales, or lowering overhead, and presumably increasing cash flow into their pockets. The only choice an employee has is relying on a piddly raise every year or moving on to another company that will pay more.
As for employees' houses and cars, I really don't care what they buy. They need to work for what they think is fair. What is fair is determined by what they can get working for someone else. What they can get working for someone else is determined by how badly someone else needs them and how hard it is to find someone that can do what they can do. That, of course, is determined by how much work there is out there. Simply put, supply and demand.
From your post I would guess that you haven't had too many people working for you and don't really see the big picture yet. Until you have a few guys ask for a raise the same week they call in sick to go skiing and leave work early to go to their Dad's birthday party in the middle of trying to get a job out, you will not really understand.
Actually, contributor J, I think you have a fine system. It's a little unusual, but since the employees are made aware of your philosophy from the beginning, there's no reason it shouldn't work. You also seem to throw in some nice perks for them.
As far as me having employees, no I haven't, yet. But I do understand the employer's point of view. It is no fun even as an employee having to work with slackers and people who take advantage of companies. I was always a hard worker and went beyond what was always expected of me. Up until the last few years of my career, I was rewarded for my efforts. A corporate merger ended all of that and we all just became a number. Not to mention I got a new boss who didn't care about anyone but himself. This was a case of a company taking advantage of the employees and squeezing every ounce of pulp out they could. I do realize not all companies are like this, big or small.
Then, next year, if the employee is doing well, you can add another money saving perk, or increase his salary. Benefits such as family health insurance would surely be appreciated by an employee with a family and no other source of health insurance.
If someone has a different view on the technical aspects of this, please speak up. I have heard that this is perfectly legal and will work.
To the original questioner: Thank you for taking care of your guy. Not everyone has the personality to confront their boss about a pay raise. I use the word "confront" because, to some, asking the boss for a raise is a large confrontation in their opinion.
Contributor D, you seem to feel like you received no benefit from having the health care provided since you were lucky enough not to have used it. My bet is you'll change your tune soon enough now that you are self employed... Just wait till you have employees. I don't think any employee sees the other side of the fence till he has become an employer.
Am I a little cynical? You bet! But I have been an employer for 35 years. Good employees become employers and own their own shops; it's a natural progression. It makes one proud so see a guy move on to his own place... kind of a "look at him, I trained him." There is always plenty of work for everyone. Unfortunately, as the good guys move on, what's left in the barrel isn't always so nice.
Another misconception in the above post is that is isn't up to the owner to increase sales and volume to provide a better life for the employees. Believe it or not, we expand our business to benefit ourselves. More risk, more profits, hopefully. As an employee, you share none of the risks. You get paid even if there isn't a profit in the job. You get paid even when you screw up a project. Why should I stick my neck out farther so you can drive a better car or have a bigger house?
I once had a former union employee from the east coast come up to me and say "you've got a pretty good thing going here… You should be sharing more of it with your employees." Want to guess how many more days he worked for me?
I'm retired now, at 55. I thoroughly enjoyed my business. I worked with some great guys and gals for a number of years who are still like family. I paid them fair for the work they did, stayed at pay levels slightly ahead of the competing shops, and we had a liberal time off with pay policy. A couple of lousy employees is what made me decide to retire. One day I realized that I could afford to never work again and I said "that's it." Now my good former employees go to their shop to work, I go to my yacht, and the loser employees wait for their unemployment check to arrive.
If you feel an employee is doing more than you expected when you hired him, he deserves a raise, but don't pay anyone too much above the local going rate. Someone else who is desperate will always offer more and you can't keep up.
If you are making more money than you expected, you deserve the raise. Maybe your management skills are better than you thought.
Now, I am married and my wife is pregnant. Luckily, she carries the benefits. In about 6 months, I will have to make a decision to cover that expense myself or go back to work for someone that does. So, yes, I understand the expense. I will understand it even more in a few months.
I think each employee has to be on a case by case basis. You know who your good workers are and who aren't. If you feel you have an above average worker and feel he will stick around for a while, why not pay him above market? You want to keep him, don't you? No, I wouldn't make a habit of paying above market just to get workers from the competition. But I think special employees deserve better treatment. Yes, they will probably move on someday. That is to be expected. If he is treated well, you stand a better chance of keeping him around.
Contributor S, I'm sorry you had a bad string of employees. There are a lot of people like that. I know, I've had to work with them. It's not any fun for the coworker either. All I'm saying is, when you have a good worker and he stands out from the rest, treat him well. He will appreciate it and will give back in increased productivity, better quality or something.
Employees don't share the risk? Really? Yes, they will get paid regardless. But, I bet if you have a run of a few years of slow business, employee incentives will diminish. That is the risk they assume and have no control over. You can try to increase sales or whatever it takes to increase your profit, but without employees, it won't happen. If you have good employees and they know they will benefit from the increase in profit, I guarantee they will get more out of them than if you don't offer anything.
I know this from experience. Yes, as an employee. You get what you put into them. If you treat your employees like crap, crap is what you will get in return. If you shower them with benefits and incentives, you will get productivity in return. If you have slacker employees who don't care either way, then get rid of them. That is part of developing a team and everyone has to be a team player, including the employer.
I know this is getting long. But let me give you this real life example. The last few years of my career, we were lucky to get raises. The one time I did, it was a lousy 3%. This all with a sizeable increase in sales and profit each year. Bonuses had stopped. I continued to do a good job and bust my ass because that was in my nature. I couldn't do a poor job. On and on I pursued, hoping the ice would break and I would get rewarded for all of my efforts. This went on for 3 years. I was given quite a few multi-million dollar projects that were successful and everybody loved. Did I get anything for that? Sure, the same ole paycheck every week. Finally, I was put on a $20M project. I was hesitant to bust my ass on this one because I knew I would get nothing in return. But, I persevered and got the project done. As usual with me, way before the due date and met all of the customer's expectations.
I got absolutely nothing in return for doing a great job and helping the company make more money. I spoke with my boss about it and the fact I was being paid under the market. All I got were promises. I gave him time and nothing came about. Why? Because I was still there and doing my job. Why should he do anything more? I would stay there and work regardless. I had proven that already. Guess what? I walked into his office and handed him my resignation. He was shocked, to say the least, but tried to play it off like he didn't care.
To this day, I am glad I did that. I gave that company the best years of my career and they took advantage of it. The department hurt for quite a while due to the overload of projects I left behind. They hired someone to replace me, but to this day, he hasn't replaced me, if you know what I mean. The company has lost money by losing me and they don't even know it. Some do, but the people that matter don't.
There is nothing wrong with throwing money, or incentives of some sort, at your good employees. You will stand a better chance of keeping them than not. If he grows and wants to move on someday, so be it. He gave you his best while he was there and you both reaped the benefits. Life goes on.
This has gotten blown way out of proportion. There are extreme cases like mine as an employee and then there are extremes as an employer that obviously some of you experience. It isn't like that at every company and I know that most of you here as company owners do take care of your employees. That is what started this whole thread and obviously the guy was given a raise for his efforts. That's how it should be.
It would be different if I had only one employee, as the person posting the question has. Then I would give them the raise without him asking. Because without a core of good employees, your business will never do well.
But I also think training is a good way to hang on to staff. I train staff on a regular basis. This builds good communication, as you are working with staff one on one. This also keeps existing staff on their toes as they know they are not indispensable.
Nobody ever comes to me demanding a pay rise, as this shows a lack of respect and they will be warned that this is not acceptable. You must remember who the boss is.
I would like to point out that there is a very good employer-employee relationship, and there is also a good employee-employee relationship, which is arguably more important in terms of staff retention. Because just as I do not tolerate a lack of respect towards myself, I do not tolerate it among the employees and I will remove any troublemakers no matter how good they are at their job.
I work in the sawmill buildings as often as I can, as it is one of the main motivation boosters. They will work hard if you are working hard with them. They do not understand that you may also be working hard in the office chasing up bills or phoning the bank.
My last point is this: count how many employees you would have on Monday if you had to say this on a Friday: "Things are tight just now as the company hasn't been paid, but I can assure you that this week's paycheck will be paid next week along with next week's paycheck."
