Providing financial security to workers pays off: On the risks of employee financial insecurity for organisations and how to control them

“Note to salary setters: Pay your people the least possible and you’ll get from them the same.” – Malcom Forbes

As the above quote illustrates, paying poor salaries can have negative consequences for business. Not only that, expecting a good salary in return for one’s labour is a fundamental entitlement of employees toward their employer. A good salary is recognised as a precondition across models of work motivation, decent work and wellbeing in human resource management and psychology. The general understanding across these literatures is that while very high salaries will not necessarily lead to productivity or wellbeing gain, wages that fall below a certain threshold will almost certainly lead to negative outcomes. Still, for various reasons, not all jobs pay decent wages – but this comes at a risk.

A wide array of psychological and sociological research shows that paying people badly (i.e. just the minimum wage, irregularly, or not appropriate for the costs of living) comes with a host of negative consequences, starting with employee wellbeing, but also for employees’ organisational performance. More specifically, keeping employees in a state of economic vulnerability by paying too little does not make good business sense over the longer term. Like the exploitation of natural resources, exploitation of human resources eventually comes at a high cost for organisations and societies.In this paper we focus primarily on low pay as the “objective” component of economic vulnerability. Low pay can come in two forms: low wages and low labour earnings. Low wages refer to hourly remuneration of an employee and are defined as gross wages below two-thirds of the national median gross wage of a country.