Here in Massachusetts the minimum wage just increased to $11/hour, the highest minimum wage in the country.  Campaigns are in effect here and elsewhere to increase the minimum wage to $15.  How will this impact those workers getting the increases?  And what about the businesses?  What is a conscious wage?

Part of the challenge of this process is adopting the mindset of balanced value for all stakeholders, a core tenet of Conscious Capitalism.  In making a choice to increase wages for lower paid workers a company may be sacrificing profits in the short term in order to build trust and unity among employees.

Consider the counterintuitive notion that paying your employees more is more beneficial for your business than the money you would save by paying less.  According to Goldman Sachs “there is a high correlation across all sectors in terms of cash flow generated relative to payroll per employee” and further suggests that “companies that invest in their workforce will reap exponential benefits.”

If this mindset is compelling to you and you are interested in assessing the “consciousness” of your compensation programs consider the following:

1. Are you paying a living wage?  If you pay the minimum wage is it enough to meet an employee’s basic needs: food, housing, child care, medical care, transportation, savings, recreation, and miscellaneous expenses, etc.  A living wage is defined as the wage a full time employee would need to support a family of four above the federal poverty line.  Living wages in the US range from $8 – $20/hr. depending on the cost of living for a given community.

2. Are your wages fair and competitive compared to the market – your industry peers? This can be assessed using a compensation study to compare your wage rates with your competitors.

3. Are your wages fair internally? One way of assessing internal fairness is by determining the ratio of any team member’s compensation to the average pay of all team members.  CEO to worker pay ratio is capped at some purpose driven businesses like Whole Foods.  Certified B Corps typically cap their pay ratio between 5:1 and 10:1.  Meanwhile ratios at some large corporations exceed 400 and 500 to 1.  Another area to consider for internal fairness is how employees are paid within a level at the company.  For example, at Whole Foods everyone on the leadership team is paid exactly the same salary, bonus and stock options.

4. Do you share compensation info?  Can everyone who works at the company know what everyone else is paid?  The rationale for this is to ensure fairness and foster solidarity and trust.  When people are allowed to give feedback about what they perceive to be unfair the company can then make adjustments to build more fairness into the compensation program.

5. Team Compensation – Do you have gain sharing? (Everyone on a team shares in bonuses when the team increases labor productivity.  Bonuses are paid in proportion to the individual hours worked)

What other considerations do you have for your conscious compensation?  Are you finding that paying your employees more is more beneficial to your business than the money you would save by paying less?

Resources for this article:

The B Corp Handbook p 56 – 58

Conscious Capitalism pp 92 – 95

Boston Globe Business section 1/2/2017