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Tough Call: How much should you pay new hires?

You want how much?

An applicant for an entry level position wants more money than your experienced team members earn. What would you do?

You’ve seen a lot of changes in your LBM career; many of the most jarring changes have happened during the past 18 months, when the pandemic threw a wrench into our reality. Thanks to having a solid team in place, you’ve managed to navigate the obstacles, and your company is doing well. The biggest challenges were spiking lumber prices and product availability. While lumber prices have improved, lead times for many products is still far longer than you or your customers are used to. So you’ll continue to do all you can to minimize the disruption to your builders and keep moving forward.

The one challenge that was already tough before the pandemic and continues to worsen is the staffing issue. Fortunately, you have a great core team of people who’ve been with you for years. You treat them well, pay them fairly, let them know how much they’re appreciated, and they’ve assured you that you can count on them. Unfortunately, there aren’t enough of them to get everything done, and you’ve been working hard to hire some new team members. To put it mildly…it ain’t easy.

The problem is apparent on your  drive  to  work  each day. Instead of promoting their latest menu item, fast food signs shout, “Workers Needed. $15/hour to Start. Free Food. Apply Today!” Other  businesses  have  installed  signage near the road that say, “CDL Drivers Needed—$500 Sign-on Bonus!” Two doors down, the sign proclaims, “Top Pay for Good People. Stop in Today!”

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The competition for workers is white hot, and while you understand supply and demand, you’re wrestling with the reality of the dollars involved. For example, Bob has been with you for nearly 10 years. He started just above minimum wage, and after earning steady increases each year, he’s now at $20.50/hour, which works out to just over $42,000 per year, which you view as more than fair for someone in their 20s who started out right after high school.

Contrast that with Chuck, who just applied for a job (and strikes you as a younger version of Bob). Though he has no experience and is just out of high school, he declined your offer of $18/hour to start. “I can earn the same money at the store across the road, and that’d involve a lot less lifting and hard work,” he explained. “If you can make it $22/hour, I can start today.”

Bob and the other yard workers are stretched thin, and while they like the big paychecks that come with overtime, you’re worried about them burning out. So, as much as you’d like to have Chuck join your crew today, you don’t like the idea of starting off by paying the new guy more than you’re paying Bob and some others on your team. Then again, you need people, Chuck could do the job, and the money you’d save in overtime would make up for the premium it’d take to get him onboard. What would you do?

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Negotiate: Tell Chuck you’d love to have him come aboard but can’t start him that high. Offer a lower wage with the promise of a raise after six months, benefits, etc.

Do it quietly: The market determines wages, you don’t. Chuck may be the best prospect you’ll have for a long Offer him the job, and ask him to not discuss pay with his new coworkers.

Do it big: Say yes to Chuck’s number, then give your existing team raises to ensure that they’re all earning more than the new guy.

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Just say no: Just like lumber prices peaked before returning to earth, this too shall pass. Don’t feel pressured to overpay. Wait until things become more normal, then move forward.

What would you do?

Something else?
If you’d take a different plan of attack, email your suggested solution to James@LBMJournal.com. If we publish your reply, we’ll send you an LBM Journal mug.

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