4 Not-So-Obvious Effects of Underpaying Staff
Updated: Apr 19
Before we dive into this topic, it's important to establish we're not talking about paying workers below the minimum wage in which is associated with many detrimental legal consequences. Rather, this blog post is about paying employees less than they believe they deserve for the role in and their level of performance. This could be fueled by what other companies pay for parallel roles, the salaries of colleagues or personal standards.
1. Poor performance
When employees don't feel they're paid inline with their responsibilities, they don't feel motivated to fulfil their responsibilities. Thus, productivity drops, with staff members feeling undervalued and thus allowing themselves to underperform. This results in an efficient allocation of company resources, that could have been avoided in spending a little extra on wages and gaining a lot extra in labour. This may also impact consumers and clients, which may experience poor performance leading to complaints, potential compensation and boycotting of the brand.
2. Low loyalty
Employees that feel undervalued by their employers, fail to feel a strong connection to the company, thus hold limited loyalty. This may result in a discussion of non-confidential workplace issues with colleagues and outsiders, spreading negative information about the company. Which has the potential to create a...
3. Poor reputation
...bad reputation. Having a poor reputation can detriment the business in a variety of ways. It increases difficulty recruiting, which can impact the quality of staff brought into the business hiring out of desperation rather than choice. In addition, a poor reputation has the ability to detriment sales, driving away socially conscious consumers and clients who only desire to work with Socially Responsible businesses that serve as an employer of choice.
4. Low Morale
Unhappy employees create a poor corporate culture, spreading low morale and holding the potential to breed a toxic work environment. This leads to high staff turnover, which is an increasingly large issue when experiencing difficulty hiring as a result of a bad reputation, leaving businesses with unfilled roles, pushing employees to take on a larger workload when they were already unhappy with their compensation for their original one. This has the ability to perpetuate poor performance, and thus low morale.