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Employment is an economic exchange, regulated by both law and market forces.  As a threshold matter, the payment arrangements you make with your employees must comply with the minimum wage and overtime requirements of the Fair Labor Standards Act, state law and local ordinances.   Beyond that, however, the question is what the market will bear.  Talented employees generally know what they are worth, but may also appreciate a good boss and compatible co-workers.

If you want to keep good employees, but can’t pay market rates, you may be able to buy some time with improvements in business atmosphere.  Time may be all you get out of this strategy, however, because if your pay structure never approaches market, your employees will eventually walk.  These five things should be a permanent part of your business culture to carry you through similarly permanent business cycles.


Every performer you’ve ever met is a praise-junkie, also equipped with infallible nose for the difference between cherry pie and cowpie.  Don’t be stingy, but do be selective.  You could gain ten points for a well placed thank you or lose 100 for phony praise.  If you feel praise is deserved, but are uncertain how an employee might take it, it’s time to get to know that valuable worker a little better.  Can you have coffee?

Public Transparency

Why aren’t you able to pay that employee what he or she is worth?  Presumably it’s not something within your control or you would have controlled it.  When, in your best estimate, do you imagine that this situation might be rectified?  It may be better to share what you know, to the extent you can, because people will fill information gaps on their own if you don’t.  Those stories can be wild and quite paranoid.  Remember that you are only trying to buy time, not to create a permanent state of underpayment.

Be Reactive

Why, during the summer months, do you find a melted popsicle on top of the office thermostat?  Over coffee, you may discover that your employees are miserable in the air conditioning.   This was not, even remotely, what you would have guessed.

You and your employees may be looking at totally different issues.  If you can do something immediately about an immediate concern,  that may buy you some latitude on looming pay issues.  Listen.  Learn.  React.  The last step is the most important if you don’t want to lose credibility.


This can be delicate.  Unlike praise, perks are more valuable if they are there for everyone.  Who doesn’t appreciate the magical appearance of pizza in the break room?

On the other hand, if the perks become too frequent or too lavish, they may actually backfire, appearing to substitute for the raise that is actually required.  Thanks, but I would take a bonus over a holiday party.

Temporary Troubles

If they otherwise like where they work, employees may be patient, but not forever.  If you genuinely can’t pay your employees approximately what they can get elsewhere, and you see no end to this problem, it may be time to consider the larger picture.  Do you need employees?  Would temps or occasional work from an independent contractor be a more sustainable approach?  More to the point, do you need customers or investors?  This is not a pay issue; this is a profitability problem.

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