Why High Salaries Can Be Bad for Your Business

by Evil HR Lady on November 7, 2016

Everybody loves a good sized paycheck, and if you want to get the best people on board, you need to pay more than your competitors, right? After all, onsite dry cleaning and lunchtime yoga can only go so far in attracting the top talent.

This, of course, is true, but there’s a downside to paying above market rate: You create prisoners.

What is an office prisoner? Consultants Aon Hewitt describe it as “people who stay at their jobs despite feeling unmotivated, disengaged and generally negative about their employers.”

Fortunately, these people make up only about 8 percent of employees–still enough to be a drag on your company, though. Most employees who become dissatisfied with their job move on, but some stay, and those people are a drag on productivity and morale.

One company that Aon looked into, found that among those who fell into the “prisoner” category, 61 percent received salaries above the market rate.

To keep reading, click here: Why High Salaries Can Be Bad for Your Business

{ 7 comments… read them below or add one }

grannybunny November 7, 2016 at 6:23 pm

This has to be close to the ultimate in “First World Problems!” 🙂 Seriously, though, the 8% who are “unmotivated, disengaged and generally negative” can be dealt with by other means than punishing the remaining 92%. This is the worst possible argument against paying competitive salaries.

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Anonymous November 7, 2016 at 6:44 pm

Grannybunny, I disagree. I think the article makes a valid point. Often those who have checked out are doing the minimum to basically keep their jobs and not get fired (and it’s always a risk to terminate employees without good cause, even in an at-will state). So, yes, employees who are overpayed may very well end up being a drag as they become less engaged, but are still plodding along make ends meet at their jobs.

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Camellia November 7, 2016 at 9:17 pm

But as grannybunny said, those people can be dealt with by other means. An employer should not fear firing an employee as long as they have followed a process, PIP, whatever each company calls it, that outlines how an employee must improve.

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Anonymous November 7, 2016 at 9:43 pm

This article isn’t about NOT paying competitively, it’s about not OVER paying your employees. You can pay competitively, keep your talented people, and not OVER pay people, which would make them feel like they could never do as well anywhere else, so why would they ever move on?

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Anonymous2 November 8, 2016 at 1:08 am

Yes, thank you for pointing that out as a lot of people seem to be equating overpaying with paying competitively. The article specifically says you want to pay competitively – not too law, but not too high, either.

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Jill November 8, 2016 at 4:33 pm

I am overpaid. I don’t understand grannybunny’s point about dealing with people like me “in other ways,” which implies ;that all overpaid people are bad workers. I’m a good employee and enjoy the work I do. It’s just that my manager sucks and makes life in this office miserable. My morale is low and I hate being here.

But to get a similar job elsewhere, I’d have to take about a $16-20,000 per year pay cut!! I can’t afford a cut that high so I stay. Even though I’m miserable. Eventually, I can see me being less willing to go above and beyond, which is the point the article makes – I’m miserable, but I won’t leave because my pay is higher than industry average.

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Anon for this November 8, 2016 at 8:57 pm

So here’s a situation where overpaying is helping to retain a high performer as an offset to less desirable things about the job. I don’t think you can single out one element of a job experience and say “don’t do that”. Overpaying might be a remedy for more limited benefits, it might create some stickiness in job markets where it’s more trendy to jump around looking for the next bright shiny object. Yes, it might keep other folks around too long, but manage them or set the bar higher or whatever. Every job has a value proposition which includes pay, benefits, commute, desirability of work, etc…. so you have to evaluate each component relative to that overall value prop.

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