The Key to Boosting Corporate Profits: Pay Employees More

Gabrielle Karol

Last week, an image featuring former Costco CEO Jim Sinegal touting Costco’s generous wages for employees went viral.

In case you didn’t see the meme, it said, “Costco CEO pays his employees $17/hr on average, plus benefits, earns less than $500K, refuses Wall Street demands to cut employee salaries and benefits.”

What the image neglected to say is that he’s no longer the CEO.

No matter. Since it’s not every day that a company’s former CEO makes news, we took a closer look at the 2005 New York Times profile that inspired the meme, discovering some amazing facts in the process about how Costco put employees first–while still managing to become a leading player in the industry.

A number of studies–as well as the success of companies with similar attitudes as Costco–have revealed a surprising truth: Happy employees create huge profit margins.

Yes, the key ingredient is happiness—not intelligence, hours worked or years of experience.

We’ll take a look at how treating employees right benefits companies both immediately and in the long run, as well as how the innovative methods used by employers can help keep their workers happy.

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How ‘Pay More Money, Make More Money’ Works

Broadly speaking, keeping employees content helps them to stay engaged and productive at the office, which in turn helps make companies more profitable. Dr. Noelle Nelson, a clinical psychologist and the author of “Make More Money by Making Your Employees Happy,” told Forbes: “When employees feel that the company takes their interest to heart, then the employees will take company interests to heart.”

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But how exactly does treating employees well improve profits?

There are a few proven methods: Providing better benefits, promoting from within, offering employee training and compensating generously. While these methods have a variety of results, all of them work to prevent employee turnover, which results in a loss of productivity due to the time spent hiring and training new employees–not to mention that turnover is expensive, thanks to the recruiting costs associated with filling open positions.

Let’s take a closer look at the factors that can impact a company’s bottom line:

1. Offering Better Overall Benefits

The 2012 Aflac WorkForce Report showed a clear correlation between satisfaction with benefits packages and overall satisfaction: 73% of workers who are very or extremely satisfied with their benefits profess an equal level of satisfaction with their jobs.