This minimum-wage and tips system costs too much

I wonder if those people ever stop to think about what it costs their businesses every time an employee quits in order to get a decent paying job somewhere else, and the employer has to backfill with overtime pay and then train a new worker to replace the old one.

Employee turnover is among the biggest hidden costs of doing business. It stands to reason that the crummier the paycheque, the more an employee is going to be on the lookout for something better.

So when one of them quits, and a new worker comes on board, a supervisor must take the time to show him or her the ropes for days or weeks, cutting staff efficiency and driving up the costs of production.

This is worth thousands of dollars in recruitment costs, administration and training each time it happens. One U.S. study concluded that replacing an $8-and-hour employee costs an average of $9,444.47.

And why can’t we get rid of the tip system? We all know it’s a royal pain.

A couple of weeks ago, I took a flat-rate taxi ride to an airport and when we arrived, the cabbie — who hadn’t spoken a word until then — politely informed me, “That’ll be $63 plus tip.”

This whole tipping thing is a topic for another day, but in the meantime there are a lot of bosses out there who would do well to wake up to the poor economics of paying low wages.

I’m Mel Rothenburger, the Armchair Mayor.

by Armchair Mayor

This minimum-wage and tips system costs too much

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