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Addressing A Minimum Wage Increase Without Losing Your Staff

  • Written by  Fara Haron, Arvato

0aaFara Haron ArvatoMoney talks, but a minimum wage increase will interrupt the conversation. A legislative wage increase might throw your retail business into panic, that is if you don’t already have a strategy in place. When you must begin paying your employees more, it is easy to find and implement the quickest solution; to make up the cost difference and fast. This often takes the form of cutting employee benefits, and while this may be the fasted road to cost saving, it is also the highway to turnover. Cutting benefits means unhappy employees, lower retention and fewer job applications.

A minimum wage increase can seem like the perfect storm, but it doesn’t have to be. In fact, the legislative change isn’t the problem, you just need to be armed with a sound strategy for when it occurs. Your approach should begin with recognizing the value of your entry-level employees and, in particular, your customer service staff.

Three Considerations For Your Minimum Wage Strategy

1.Consider: Data shows that with a wage increase, consumers expect more from businesses with six in ten Americans citing they are justified in expecting better service with a wage spike.

In the retail business, your floor employees may appear to be the frontlines of the business. While there is value to be had with in-store operations and conversations, an often-forgotten piece of the puzzle is the customer service team. These are the employees who virtually represent your business and are fostering your reputation among customers. If you cut their benefits, ultimately you will not only spend more on their wages, but also on additional efforts to attract and retain new employees.

Instead of setting your retail business back months, focus on how you can retain the customer team you already have. This might mean retaining benefits and potentially even offering a wage higher than the minimum. Yes, it is a costly choice, but turnover can cost between 30% and 150% of an employee’s annual salary — a higher price in the long run. By keeping your talent around, they will enhance their skills in representing your brand and maintaining positive customer relationships. As such, you will save money AND fulfill the customer expectation of higher quality service to accompany the wage spike. The bottom line: your people are worth the investment.

2. Consider: Columbia Business School and Duke University’s Fuqua School found that more than 50% of executives say corporate culture influences “productivity, creativity, profitability, firm value and growth rates.”

Offering a wage higher than the minimum will certainly influence retention, but a larger influence is the overall culture of your retail business. To be sure your staff want to stick around, you should focus your efforts on creating purpose within your organization that extends from executives to entry-level.

Culture goes beyond Casual Dress Fridays and Bring-Your-Dog-to-Work Days. Your entry-level employees, like your customer service representatives, want to see that they have a future with your company. They are more motivated to succeed when you are invested in their future, so think about offering proactive seminars or discussions during which your employees learn how to succeed internally. Also remember that your customer service team knows better than anyone the frustrations and desires of your customers. Place value in their customer understanding and you will see they want to contribute further to your business and its success.

3.Consider: A recent survey from Arvato found that 49% of people do not want to be served by a chatbot, however 31% want more automatic call backs and 28% want more real-time order updates.

While your people are worth a hefty investment in wages and culture, there is no denying that today’s workforce costs more than ever. Particularly on the customer service side of retail, there is opportunity to leverage technology where humans might otherwise be doing tedious work. As a retailer, you should be considering affordable solutions like automation-based technology.

That said, your business needs to be smart about where technology can help and where it will hinder; that’s where you can look to the data for guidance. If consumers want more automatic callbacks and real-time order updates, invest in the proactive technologies that will provide your customers these conveniences. This will make your company more efficient, and your people will grow in skill and confidence. When a minimum wage rise comes around, you won’t be dramatically affected by the change.

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It is not unfair for consumers to expect better customer service when the minimum wage increases, but it is also not going to happen overnight. Your retail business will need to work hard to fulfill the expectation and consider carefully what the data is telling you. One key to a successful minimum wage strategy is placing value in your entry-level staff, particularly recognizing that the customer service team has keen insight into your audience. By wisely investing in your workforce today, you can avoid a major impact from legislative decisions later.


Fara Haron is the CEO of global business process services at Arvato and is a member of the Arvato CRM board. She has been with Arvato since 2009, and has led a rapidly growing team of CRM professionals while leveraging her international experience to support Arvato’s global CRM business. 

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