Investing in Your Employees

I run a small business and it’s always a challenge determining how much I should pay my employees. Do you have any suggestions that will help me make better decisions in this area?

There is a wealth of wisdom contained in the Church’s teaching on this subject. Let’s start by reading what the Catechism of the Catholic Church has to say. This is from No.  2434:

“A just wage is the legitimate fruit of work. To refuse or withhold it can be a grave injustice. In determining fair pay both the needs and the contributions of each person must be taken into account. ‘Remuneration for work should guarantee man the opportunity to provide a dignified livelihood for himself and his family on the material, social, cultural and spiritual level, taking into account the role and the productivity of each, the state of the business and the common good.’ Agreement between the parties is not sufficient to justify morally the amount to be received in wages.”

I never cease to be impressed by the balance that the Church brings to bear on its social teachings, and that balance is easy to see in the above reference. On the one hand, the Church clearly spells out the responsibility of employers to pay a wage that meets the needs of the employee. On the other hand, the employee has a responsibility to be a productive member of the employer’s team. And the employer has a right to reward employees based on their respective roles in the organization.

Based on my experience in big business as well as the more recent apostolic work I’ve been involved in, here are a few additional thoughts that may help.

One effective approach that can guide the development of your wage structure is the completion of a periodic wage survey. Check with your chamber of commerce, economic development agency or even a temporary staffing service to see if they can provide wage information for various positions for your local area. While you may need to adjust numbers to take into account a living wage, a survey like this can be a good starting point.

I’m a big believer in incentive pay. I’ve seen tremendous results by having the overall pay system include a substantial potential for bonuses that are tied to business performance. Some companies limit these bonuses to a few employees. I would encourage you to involve all employees in your incentive plan.

I remember implementing a bonus plan at one organization. During the afternoon after the plan was announced, I found myself in the warehouse. The shipping clerk had a dance in his step as he filled orders. He was saying, almost as in song: “Bonus, bonus, bonus!”

While he never noticed me, you can bet I noticed his upbeat attitude and it put a smile on my face. Made an impression on me, too. It reminded me what a difference it can make to share proceeds when times are good.

God love you!

Phil Lenahan is president of

Veritas Financial Ministries and author of

7 Steps to Becoming Financially Free (OSV).