Your business is growing but your competitors are not doing as well. They are laying off people and there is an opportunity to pick up staff. The potential employees are desperate for a job and they are willing to take a large pay cut to get the job.
Do you take advantage of the cheap labour market and give the potential employee a large pay cut? Here is a summary:
- saves you money
- employee is happy he/she is still employed
- economy improves and there is a shortage of employees
- employee realizes that they were underpaid for many years and they have been looking to improve their own compensation for many years
- employee finds out that all other staff at his/her level are making more money than they are resulting in anger and also less than optimal work performance
In summary, hiring at a deep discount to take advantage of a poor employment market gets you good staff for the short term but will they become long term employees or will they always be looking for a better paying job? Even if you give the employee a large raise when the market improves, this may not be enough to keep them with the business. It may be too little too late. Giving large raises after they start to bring them up to normal salary levels may work with retention. Keep it in mind it is cheaper to keep good staff than it is to have a business with high staff turnover.