<Insert Name>
Compensation Manager
<Insert Company Name>
<Insert Address>
<Insert City>
<Insert Name>
Chief Executive Officer,
<Insert Company Name>
<Insert Address>
<Insert City>
RE: SOLUTIONS TO THE INCREASE IN THE MINIMUM WAGE RATE
The decision by the local legislators to increase the minimum wage rate from $7.25 to $7.75 may lead to a high increase in the cost of production of the company thus affecting its revenues. Although the new policy may not be good news for the company, it may work in its favor in the long term. This brief examines how the increase in the minimum wage rate by $0.50 will positively affect the organization.
Potential Challenges
The new compensation requirements could unconstructively affect the earnings of the company, especially in the short-term. In this regard, paying higher wages to the members of staff will lead to an increase in the production cost, which will then affect the profits earned by the organization. Following the increase in expenditure, the available resources will have to be shared between workers and critical operations. However, if such policies are implemented well, the organization can experience numerous benefits (Balsam, Fernando, & Tripathy, 2011).
Potential Benefits
With the increase in competition nearly all industries, it is important to understand that the wages paid to employees have a direct influence on the performance of the organization. Decent salaries help to retain talents in the company thus promoting long-term efficiency and effectiveness. A high employee turnover can hinder an organization from favorably competing with its rivals in the industry (Hsieh & Chen, 2011). Therefore, complying with the new figure of $7.75 will enable the corporation to retain its human resources thus enabling it to compete with its competitors at the same rate given the fact that the changes will cut across the country. By raising their earnings, the organization will be able to boost its competitiveness in the sector.
Employee motivation is the other benefit that the organization stands to gain by raising the minimum wage rate to $7.75. According to Campbell, Coff, and Kryscynski (2012), when employees are given a pay rise, they tend to improve their performance. When the proposed MWR adjustment is effected, the first company to conform to the new policies will motivate its employees and boost their morale. Higher earnings lead to highly productive workers as most of them are willing to work extra hard to earn the increment. As a result, their output and the firm’s productivity go up. Employee motivation also leads to the establishment of a good relationship between members of staff and the management thus ensuring all the operations occur in a smooth fashion. Balsam et al. (2011) argue that paying human resources slightly higher than the minimum wage leads to enhanced output due to the reduction of absenteeism and other factors that may lead to underperformance.
Best Way Forward
Following the high number of employees in the organization, the company can also choose to downsize its workforce to maintain its cost of production at a minimum and profits at a maximum. This can be achieved by linking some duties performed by the employees in the service industry. Downsizing is a strategy that is employed to ensure that the company sustains its operations while maintaining its competitiveness in the industry. However, the increase in the minimum wage rate can be a good opportunity for the organization to establish new initiatives to expand its operations to offset the increased expenditure on wages (Datta, Guthrie, Basuil, & Pandey, 2010).
Conclusion
Although the rise in the MWR will reduce the profits due to the increase in the cost of production, the high wages will also positively affect the operations of the organization. Earning a decent salary is important for talent retention and the motivation of employees to improve their performance and that of the organization.
Best regards,
<Insert Name>
Human Resource Manager,
<Insert Company>
References
Balsam, S., Fernando, G. D., & Tripathy, A. (2011). The impact of firm strategy on performance measures used in executive compensation. Journal of Business Research, 64(2), 187-193.
Campbell, B. A., Coff, R., & Kryscynski, D. (2012). Rethinking sustained competitive advantage from human capital. Academy of Management Review, 37(3), 376-395.
Datta, D. K., Guthrie, J. P., Basuil, D., & Pandey, A. (2010). Causes and effects of employee downsizing: A review and synthesis. Journal of Management, 36(1), 281-348.
Hsieh, Y. H., & Chen, H. M. (2011). Strategic fit among business competitive strategy, human resource strategy, and reward system. Academy of Strategic Management Journal, 10(2), 11-32.
