the benefits of paying your employees well.

The COVID-19 pandemic changed the Canadian economy in several different ways. First, there were layoffs as companies sought to comply with restrictions and remain solvent.

Then, the Canada Emergency Response Benefit (CERB) program kicked in to help workers pay expenses.

As economies began to open up, there was a big upswing, followed by an economic downturn with sky-high inflation pushing up the cost of living.

After CERB payments ended, employers found it more difficult to hire reliable minimum-wage workers.

• But should Canadian companies pay workers minimum wage in the first place?
• And is pay important to employees?

The short answer is yes, there are many benefits to increasing employee wages above the minimum wage in Canada. Pay is particularly important to Canadians during this cost of living crisis.

a primer on the advantages of minimum wage increase

Canada’s financial response to the pandemic meant that millions of workers no longer had to work for minimum wage as a salary.

That prompted an average wage increase in the marketplace as companies sought to tempt workers back into warehouses, factories, offices and restaurants across the country. 

No matter what type of company you operate, minimum wage vacancies no longer attract many talented applicants—especially in high-demand areas. To improve your candidate shortlist, consider offering higher wages.

As an employer, you can take the initiative and pay your workers more than the minimum wage, especially during this cost of living crisis that we are currently facing.

The benefits of better compensation and benefits go far beyond talent acquisition, too. Let’s dive deeper into some of the tangible benefits of paying your employees well

1. higher wages mean staff turnover decreases

As wages increase, staff turnover rates decrease. During this cost of living crisis, many people struggle to pay for the basics because they’re not compensated well at work or because of inflation.

Employees are now forced to seek alternative employment.

Conversely, people who are paid well—who can afford the basics plus a little extra—tend to stay with their employers. 

High turnover isn’t just inconvenient for companies; it’s also expensive. Recent research by the Canadian Federation of Independent Business revealed that employers often underestimate the costs of hiring new employees.

Recruitment expenses, training expenses and loss of revenue associated with a new employee’s limited initial productivity soon add up. According to Manulife Financial, these costs can total 40% of an employee’s yearly salary.

Check out our tips for reducing turnover.

2. raising wages raises employee morale 

People with higher wages feel better about their work and their standard of living. Plus, generally speaking, company profits increase along with employee morale.

It makes sense to implement measures that boost morale across the board. Perhaps unsurprisingly, the benefits of paying your employees well lift the spirit.

When people feel happier at work, they also feel more loyal to their employers. Perhaps one of the biggest advantages of hourly wage increases is that they improve loyalty—paying dividends in the long run. 

Loyal employees produce better work, stay engaged, recommend other potentially good workers when vacancies arise, and spread good cheer about your brand.

3. better wages improve productivity 

You don’t have to limit better compensation to an hourly wage increase. Employees working can gain performance-based bonuses, annual bonuses, and commission schemes to boost morale and productivity at the same time.

Highly engaged, productive employees drive your company forward and will stay at your company long-term. 

In simple terms, highly productive companies are more valuable than less productive industrial peers.

Productive companies handle bigger contracts successfully and can then market themselves to progressively larger clients, further boosting their industry standing.

If you plan to scale your company, paying more than the minimum wage makes strategic sense

4. profitability improves when wages improve

Earlier, we mentioned that company profits improve alongside employee morale.

There are many reasons for this, including reduced absenteeism and presenteeism, increased productivity, and greater employee loyalty.

In economics, this phenomenon is known as the efficiency-wage theory: employees who are paid a higher wage work harder to keep their jobs, boosting their profits in the process.

A Gallup poll recently found that highly engaged teams were 21% more profitable than unengaged ones.

Look no further than a recent Harvard University working paper for a real-world example of the better-wage-better-productivity connection. 

Warehouse workers at a large company who received a $1 minimum wage increase moved more boxes per hour, which led to an overall increase in productivity and profitability

5. higher wages improve brand image 

When companies only compensate their employees with the minimum wage as a salary, they lose street cred. Millennials and Gen Z Canadians gravitate toward socially conscious brands and make employment choices based on those preferences. 

When companies pay higher than the minimum wage, they directly contribute to the communities they’re based in. Community members spread the word and boost brand engagement at every level. 

Socially conscious, well-paying brands reap profitable rewards, unlike those who pay minimum salaries in Canada.

They don’t just sell more products—they also attract productive, loyal workers. Staff turnover rates stay low, reducing the need to recruit. Costs fall across the board, and profits go up even more.

At the end of the day, paying more than minimum wage as a salary can help you compete with other similar employers in the marketplace.

You’re more likely to attract highly skilled candidates when you post job openings, and your existing workers are more likely to remain with your company. 

In turn, you’ll spend less on recruitment and training expenses and reap the benefits of a brand image boost.

Minimum wages in Canada are rising across the board in response to the cost of living crisis and inflation—but you don’t have to wait to pay your people more.

If you raise wages at your company, you’ll attract talented candidates and keep your best team players on the side for longer.