Why Wage Gaps Are Bad for Business

No employer wants to have the dreaded talk where an employee has been hounding you for months about a raise.  This problem can be even worse if they have a valid reason, like a pay discrepancy.  If you don’t pay up at that point, your company could be facing a lawsuit.

Here are some of the ways wage gaps can kill a business and why you should avoid them.

Your Employees Won’t Trust You.

This problem may sound like an empty threat, but employees losing their faith in a company they work for could ruin the company.  If your employees don’t trust the company, they’re less likely to accept change and less likely to listen. 

This situation means word of mouth about your company will be weak and may lead to you being unable to hire new employees.

Their Performance Will Decrease

The moment your employees realize they’re being paid differently for the same work, their production may change.  Employees who are getting paid less are more likely to stop trying as hard.  Why should they try as hard as their coworker when they’re not getting paid the same for the work?  This situation can lead to infighting among the employees since the slack will have to get picked up somewhere.

Pay Discrimination Lawsuits

If the only difference between two employees receiving different pay is their gender, race, or some other protected class, you could be opening yourself up to a lawsuit.  These lawsuits are usually dragged out and can pull a company into deep debt.  A large enough trial could mean that your business dies, unable to keep running under the financial burden.  An economic consulting firm could help protect you against this struggle.

Higher Turnover Rates

Employees that feel undervalued don’t stick around.  Numerous studies have found that an unhappy employee is far more likely to leave a business, even if they like the work they have to do.  You can’t double everyone’s pay and promise them six months of paid vacation to keep them happy, but you can show that you value the time they spend with you.

How The Public Views You

Unhappy employees are something you can’t keep under your hat for long.  Whether it’s leaked emails on twitter or going straight to local media, your city will hear about what’s going on.  Instead of hoping everyone ignores what your employees say, it’s better to take the time and listen to them.  A company that gets viewed favorably is more likely to get customers.

You can hope that your employees won’t find out about any wage gap, or you could spearhead the whole thing and make sure to pay equally from the beginning.  Although, in some situations, a pay discrepancy is acceptable, make it clear why someone gets paid more.  A CEO shouldn’t get paid the same as a new employee, and people will understand that.

Just make it clear that if your company makes any mistakes, it’s open to change and will do what’s needed to ensure all of your employees get an equal step forward in life.

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