Pay Raises Alone Won't Work

Money talks. And lately, it's been really loud, with U.S. organizations advertising pay raises left and right in a desperate attempt to attract talent to fill the gaps during this "Great Resignation."

So loud in fact, one of the participants in our research shared they had received three increases across the past two years. The hourly employee went from $12.00 to $14.00 to $16.00 and now sits at $18.00. Let me be clear: pay equity is still a huge issue and organizations have a responsibility to get it right.

But if you think pay raises are going to solve your hiring problems, they won't. Talking to workers is the lifeblood of our work at exaqueo. We have heard from thousands and thousands of workers in the past decade: of course everyone cares about compensation. Our pay funds our ability to live.

So when times are tough, organizations expect a pay raise will be a quick fix. But it's not.

First, it sets an expectation. That employee whose pay has gone up four times is excited about the next raise because the employer has now set an expectation that wage will keep going up every six months. And if it doesn't, the employee will leave.

Why? The employer built a transactional relationship based on compensation. When that goes away, so does the employee. If you want your employees to stay you have to build a relationship on much more than money.

Second, employees are smart and savvy. They appreciate a pay increase, but they also know it's not as simple as that. In the past two years, the cost of childcare has risen 41% -- so that pay increase may mean nothing.

Even workers without the need for childcare are feeling the pinch. Healthcare costs are rising too, on average over 5% in 2022. Workers may see their pay go up, but again, it doesn't mean anything if the cost of healthcare does too.

Add on to that the rising cost of goods in the U.S. Everything from the cost of milk to the cookies. Mondelez, maker of Oreo cookies, predicted a 7% hike in costs of the treat along with other consumer products it sells.

It's not that pay isn't important. It absolutely is. But compensation is table stakes. You have to get it right just to be on the playing field. If you want to actually be a talent contender in the game, and an employer people strive to join? Then you have to focus on so much more.

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