Amazon Wage Set a Competitive Bar
Call it “the Amazon wage hike heard around the world.” In October 2018, Amazon announced its plans to increase wages for nearly 350,000 Amazon and Whole Foods workers to $15 per hour— more than doubling the current legal Federal minimum wage.
Other companies have increased wages to similar levels in the past, but those companies were centered around a single location, such as San Francisco. There are currently Amazon fulfillment centers in 27 states, plus hundreds of Whole Foods stores. Add Amazon’s popularity around the world to the mix, and this wage increase becomes front-page news.
The largest impact of the Amazon wage hike will be to increase pressure on other employers to do the same. Affected employers will span across industries including retail, warehousing, distribution centers, and logistics just to name a few. Amazon can afford to pay the higher wages, but for most employers, matching that $15 an hour rate is simply cost-prohibitive. They won’t be able to do it without damaging profits, reducing staff size, or upsetting stock holders.
However, there are a number of other ways employers can respond to Amazon’s wage increase, without permanently increasing their workers’ wages, including:
- Signing Bonuses: A signing bonus can be a good one-time incentive to acquire workers in a competitive environment. Based on the type of role and number of hours, a signing bonus will feel more material and get cash quicker to workers, which may be more of a priority instead of a long-term higher wage, especially during the holiday season.
- Performance Bonuses: Workers often complain that there is no incentive for better performance on the job. Try tying bonuses to specific production goals as a way to increase output and let workers know that they have some control over their financial rewards.
- Longevity Bonuses: Structuring clear cash bonuses at specific longevity milestones give workers incentive to stick around instead of simply chasing higher wages.
- Transportation Credits: Commuting can be expensive. Helping offset transportation costs through private shared carpooling programs, gas/mileage/toll reimbursement, or public transportation subsidies can help recruit and retain workers.
- Instant Payment: Consider experimenting with same-day or even shortened pay cycles for employees at certain times of the year. This can be especially effective during the holiday season, where reliance on payday loans spikes. By allowing for same-day or shorter payment cycles, you build good will, increase retention, and potentially keep employees away from predatory pay day lenders.
- Flexible schedules: Schedule flexibility is emerging as one of the most important, non-monetary drivers of how likely it is to recruit and retain talent. Allowing for open shifts, less rigid last-minute schedules, and the ability to more easily swap out of shifts is key in creating a flexible work environment. Many employees would be willing to give up a few dollars per hour of pay if they had more flexibility in their schedule.
- Outsourced Distribution and Warehousing: Another option is to outsource your warehouse and fulfillment needs to a reliable 3PL like Taylored Services. Using a 3PL means you have a fixed cost for services performed that you can budget for. Meanwhile, it’s your 3PL partner that takes on the worry about employee wages, as well as warehouse space, shipping, packaging, and a million other things.
The Amazon wage increase is a game changer for sure. Only time will tell what the long-term impact will be. But for right now, you can bet that $15 an hour is looking very attractive to workers across the nation. Even if you don’t have the cash reserves to match that hourly wage, there are still plenty of ways you can compete and keep your best employees.
Taylored Services is a fully integrated third-party logistics provider specializing in wholesale, retail, and direct-to-consumer unit fulfillment. Headquartered in Iselin, New Jersey, they operate 1.5 million square feet of warehouse and distribution space strategically located near the nation’s busiest ports, including Los Angeles, Long Beach, and New York. Since its humble beginnings in 1992, Taylored Services has grown to become a national leader in distribution, fulfillment, and warehousing