The Rising Cost of Employment and What it Means for Businesses

Why is the Cost of Employment Increasing?   

SEEK recently published an article showing the “industries where salaries have boomed since COVID”


There are some interesting principles at play here that could corner employers unnecessarily into unsustainable long term wage bills for little or no increase in output.


Before I get hounded by the Unions and Libertarians about the wages position in Australia, I totally agree that inflation has devalued the currency and store value. Workers are going backwards, and for that matter, so are businesses. Inflation only favours those holding inflationary assets. A whole other discussion.

The unintended consequences of a salary increase 

The SEEK article says (and I’m paraphrasing) that the reason for an increase is not because jobs are adding more value, or are at the forefront of technology and innovation. No, the reason is there are not enough people available to fill the jobs and therefore the demand outstrips the supply. Prices rise.


There are many unintended consequences of salary increases, but I’ll focus on two that are borne by small business owners.


First, small business owners can’t compete with the larger organisations and have a potential brain drain to higher paying larger organisations. Don’t believe everything you read about the Great Resignation. I wrote about this in November last year


The possible outcome will be that:

 The Business Owner will be forced to spend more time in the business, if that’s possible – and deal with the family fall-out;

 The remaining staff will be asked to do more and naturally expect more;

 The business increases the wages which then has an impact on the Financial, Marketing and Sales strategies.


None of these are unusual in the normal course of the day, but when they come from external forces there are always unintended consequences.


I preface this by saying that an Business should be paying their staff at an appropriate level, not what they can get away with. Having said that, in my opinion, there will be collateral damage if employers simply roll over in the negotiations for higher salaries if they are not careful.


I saw this occur in Papua New Guinea when the EXXON PNG LNG project started in 2014 as the LNG Caravan rolled into town and ran the place for 5 years. There was a mad grab for people by the Caravan where the ‘body hire shops’, those individuals and business who were selected to join the party, profited. Like most things, the average person and business not on the Caravan just saw the prices rise. Supply and demand.


The lesson here is the value of the role has not changed, yet there is an expectation that it needs to be increased based on supply and demand.


And, because of the brain drain, the businesses not on the Caravan are left holding less experienced or competent staff, who then demand more money based on, supply and demand.


We were asked for advice on how The advice we gave to these companies was to leave the base salary as it is 

It’s not too late to start creating an Employer of Choice. 

In the same Blog in January 2022, I wrote “I honestly think that the businesses that started years ago to build a Culturally Safe environment and had their employees at the heart have a march on the competition.

It’s what’s been called the Employer of Choice. Some corporate employers have tried to differentiate themselves from others and make it more attractive for employees to join.”


The SEEK article says, and I quote, Money is the top reason why people move jobs”. 

I think that’s rubbish. People become dissatisfied because of the environment in which they work and struggle to find purpose or feel unsafe, and then they start looking, and THEN they find a job with more money. And some HR person doing the exit interview asks “Why are you leaving?” – “Oh I’m getting more money”


So what they are not saying is the reason they started looking was so they could leave a toxic environment.


At the risk of sounding like a broken record, you don’t need to pay people more. You have to pay them fairly for their effort, there needs to be an internal equity between jobs (see the Great resignation article) and have a structure and boundaries for Accountability. Be clear on what’s expected in terms of performance. None of that is new, what is new is how you deliver that.

 It’s all in the delivery 

If you Trust your staff they’ll move heaven and earth to get the job done.

Treat them like shit and expect to have it smeared all over the walls.


Many Consultant start with am “Engagement Survey” or  “Feedback Survey”.


Waist of time.


My approach is slightly different, in that I start with doing nothing! What I mean is I observe and ask lots of questions. No judgement, just here to observe, interested in how you do it, why do you do it this way? Do you think there is a quicker, smarter better way?


It’s amazing how passionate people are about their job when you show interest and willing to share with a ‘stranger’. Or they are stand-offish or defensive, sometimes outright aggressive, which is also good feedback.


You might get some negative comments. That’s a good thing. Put your ego aside, it’s not personal, it never is or should be.


Now we have first hand, honest and uninhibited data that you can start to make decisions on based on your objectives. Beats the Engagement Survey approach every day.


I created the Scale to Success System to help business owners create a business that serves their purpose, not the other way around. Process, Performance, and People are at the core, and the outcome is a team of people who know what they are doing, are in control of their area, and you can see what and how it’s being done, from anywhere.


We help business owners get their business ready for sale so the value is greater, so they don’t have to sell.

That way they can retire into their business.


Steve Sandor is the CEO of Inspiring Business

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