There’s one big question that all business owners will ask at some point; how much should I pay my employees? There’s a couple of simple thought processes that go into answering this question. The first is, paying them a lower wage means that your expenses are lower and therefore, you’re making more money overall. On the other hand, you could argue that paying a low wage won’t make your company a place that people want to work and you won’t get the best people for the job. You also need to consider employee morale and work ethic when you’re deciding how much to pay people. It’s not as simple as it first sounds and if you get it wrong, it can impact all areas of your company.

Overall Cost

The first thing you should look at when you’re considering changing pay grades is the overall amount of money that you’re spending on wages. Use an online W2 generator to create all of the necessary salary forms for your employees at the end of the financial year, but review them yourself before you hand them out. If the amount of money you’re paying in wages is making up a disproportionate amount of your expenses, you might need to cut them. However, if you’re only spending a tiny amount of your outgoings on wages, you might be able to afford an increase. Why would you want to do that though?

Getting The Best People

When you’re hiring people, you obviously want the best people with the most experience. Chances are, the most qualified people are going to have a couple of offers at least. If you aren’t offering a good wage and benefits, they’ll go elsewhere and you’ll end up filling the company with whatever applicants are left after the best ones have gone elsewhere. It’s best to pay more for a sales person that’s going to bring in more revenue than it is to pay a lower wage for somebody that doesn’t make you any money at all.


Employee turnover is often considered a bad thing. When people leave, you’ll have to rehire and train people again which is costly. There’s also a chance that you’ll lose some of your best people if you aren’t paying good wages. However, turnover isn’t always a bad thing. If you’ve got bad staff members and you don’t have a good reason to get rid of them, they might leave of their own accord if the wages aren’t great. But if you’re paying a wage that’s higher than most other companies pay for that position, there’s no way that you’re going to get rid of them anytime soon.

Encourages Entitlement

You’d think that paying people more makes them work harder, and sometimes it does. But in some cases, it can go the opposite way. If people are already being rewarded well, then what reason do they have to take more initiative and work harder? It’s difficult to strike a balance between the two but it’s important that you aren’t paying employees too much if they haven’t put the work in to deserve it.

The unfortunate truth is, there’s no right answer here. The best thing you can do is pay a healthy wage that isn’t too high but still makes employees feel as though they are valued.