Does an increase in pay rate= increase production???
Updated: Nov 14, 2019
The better question might be to ask," At what time would it be necessary to increase pay rates based on current marketplace?"
We had a partner "Company A" in need of packers for some of the product that they produce and to them they started temps off at $11hr. In Illinois this seems like a very competitive pay rate to start anyone off. Currently, minimum wage is at $8.25hr and it is $2.75 more starting than minimum wage.
HR manager from "Company A" came to us and let us know that she is having an excess amount of workers no calling/no showing as well as the type of workers she kept receiving were not able to complete the job efficiently and would not last long on the job.
So, we did our homework and research about the positions in that area. What we determined was the average wages in that city were starting packers between $13.75-$15 hr. Considering, she started her workers at $11 hr and everyone else starting them at minimum $2.75 hr more put her and the company at a huge disadvantage. We let the HR manager know at "Company A" that they must increase there wages at least $2 hr more to even be in same ballpark with competitors. Once "Company A" increased wages to $14 hr they saw an influx of better qualified candidates and started to notice the no call no shows disappear as well as there candidates stay longer in the positions.
In this situation, it absolutely worked in there favor to increase wages. It increased production which decreased lost time (No Call/No Shows, etc) and helped them acquire a better pool of candidates. Does this work in every occasion? Of course not!
As of Nov 2019, they have hired on 7 employees to there company within 6 months of the increase and compared to last year (2018) have already exceeded there hires!
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