How to pay employees: An ethical, practical and global perspective

by Guest
how to pay employees

I found myself reading about global payroll the other day and it got me to thinking about how my financial situation might differ if I didn’t live in the United States, but worked the same job elsewhere. See, global payroll is the idea of handling international payroll out of one system. The reason this is becoming necessary is that paying employees across borders requires adhering to different payroll regulations and taxes due to rules in different countries.

I never think about how to pay employees if I lived elsewhere. I sometimes find myself complaining about how I’m personally paid for this or that reason. But people around the world do the same job as I do, and it looks like we have different experiences with payroll. Of course, this is obvious, but thinking about it makes me wonder what we in the United States could change and how it might benefit everyone – employers and employees.

All of this said, one of the worst things we as humans can do when it comes to our own efficiency and capacity to take care of each other is to ignore mistakes of our history and not be forward-thinking about the future. I’m not saying our practices are complete garbage, but I sincerely believe that American companies are not forward thinking enough in taking care of their employees, especially bigger corporations.

Ideally, how should we be paying those who work for us? Ideally, how should we be getting paid? I’ve done some investigation and hope to answer this so we can work toward a world that benefits everyone a little better.

I want to examine US Payroll and Benefits from an ethical, practical, and a foreign/outside perspective. Here we go!

1. An ethical perspective on US payroll

Most everyone is in agreement that workers should be compensated fairly for their labor. How does one measure fairness, though? In a world where we trade service for dollars, what is fair compensation?

The way I see it, fairness hinges on context. There are two minimum standards for ethical payment practices, in my opinion. The first is meeting an employee’s needs, and the second is providing them with a reasonable level of comfort.

Are your employees’ needs met?

Unless our current administration changes this, employers with 50 or more full time employees must provide full health coverage or pay a tax penalty. You may have heard this referred to as the “employer mandate.” Of course, you do not want to pay a tax penalty, but I urge you not to slack on such a thing either and to offer employees and yourself the best health insurance you can afford.

If you have 50 or fewer employees, I recommend offering them insurance anyway, should you be able to afford it. These people are offering 40 hours a week to you in order to be able to provide for themselves, and may have trouble doing so on their salary or pay.

There is, of course, a lot to consider in offering insurance. I highly recommend that you research what the best group insurance plans are so that they are not only fully covered, but they’re legitimately in good hands. For companies with under 50 employees, I suggest looking at the SHOP Marketplace. This allows more flexibility and employees are able to choose between different coverage and from multiple plans too.

If you have over 50 employees, I’d recommend working to find the best insurance near you geographically if your employees reside in the same area. If they do not, a bigger generic brand may be best (such as Blue Cross, Kaiser Permanente, or any of the rest of the top US insurance providers, should you be able to afford them).

Are your employees comfortable?

It should be noted that scraping by isn’t necessarily a good thing either. See, someone’s needs can be met but I’m going to go a step farther and say that your employees should be somewhat “comfortable.”

Now don’t misunderstand me. When I use the word “comfortable,” I in no way mean that you should pamper your workers and pay them so much that they can buy every expensive toy and flashy item their heart pleases. What I mean is that employees shouldn’t have to struggle each month to make ends meet. They should be paid enough to save a little bit of it in case of emergencies or big life changes. Most of us know too well that living paycheck to paycheck is not glamorous.

Now of course this is subjective and different people have different needs. No, it’s not your job to pay one person to their specific needs and then another working the same job less or more because their needs are greater or smaller. It’s a matter of general principle that says “most people with the qualifications needed for this job will be able to live reasonably on what I am paying them.” Pregnancy, eviction, deaths of loved ones, certain medical costs – these things are typically unexpected and the financial security to make it through them is something you should strive to give your employees.

This is why minimum wage is such an issue as well — it’s not a matter of deserving more, it’s a matter of needing more, sometimes in the worst moments of someone’s life!

Is this wage fair?

This last question is one you should think hard about: is the wage I am paying my workers fair? As I said earlier, fairness hinges on context. Are you paying your employees at least the standard amount for what they’re doing? Do you feel that the amount of effort they spend getting their job done is deserving of a higher wage? Consider if you were in the position of one of your employees — in fact, maybe you were in the past. Was what you made — or what they make — in your honest opinion, worth the amount of work they do for you?

You still need your employees and adjusting your thinking to this line of reasoning is crucial to creating an environment they’ll want to come back to day in and day out. Help them know their job is worth it — treat them fairly as much as possible.

However, reality sometimes gets in the way of empathy and what one feels is best. Fair wages are subjective to harsh realities sometimes, and that’s why a sense of practicality must be used.

2. Practically

practical perspective

Even when you want to pay your employees more, those motivations can be hampered by reality. Covering your costs and being able to provide for yourself can sometimes stop you from doing what you wish you could for those who offer their time and work for you.

I can’t stress enough that context is everything! It would be awesome to have great workers who get paid more than they would doing the same job somewhere else, and yet sometimes that just isn’t possible. Think honestly: what can I afford?

Are your costs covered?

A company with paid employees must be able to fund itself, no questions asked. If it’s not making more than it’s putting in then it certainly cannot afford to pay employees. All of your essential costs and then some should be covered before you start hiring people. Essential costs include your work space, all needed equipment and materials, and any outsourced work (manufacturing costs, distribution, shipping). Lastly, make sure that you can make a living before you start paying for someone else’s.

It is of the utmost importance that you do not promise anyone anything you can’t afford — for instance, a salary or pay that you don’t have the ability to offer. When Fat Wreck Chords — a record label based out of California — faced the music industry’s changes in the early 2010’s, they had to lay off several employees as to keep the business running and not financially hurt any of the artists they were working with at the time. As a fan, I always felt that was a great way for them to handle the economic downturn they faced, but also sad for those who lost the opportunity to be working their dream job at an independent record label. Granted, we are talking about practicality.

Are you being paid fairly yourself?

You should be paid more than people working under you. Can you afford to live? Can you feed yourself (or your family should you have one) Can you afford insurance? If the answers to these is “no,” then you cannot pay a full time employee. Do not kid yourself trying to seem “professional” or more “official” by trying to do something you cannot afford, because it will leave you without a company. Unbelievably, that’s something I’ve actually seen happen! So don’t waste time or money if you don’t have it.

“And Then Some”

Companies need an excess of income in order to cover for emergencies and drops in income. Employees still need to be paid, but paying them too much too early may not account for potential cash drops. My guess is you already know this, but I’m just reminding you that you need to save more than you need to, because you never know when the emergencies will come and how long they’ll last – or when they’ll pile up.

Let me promise you this, there will be ups and downs financially. You will have to be careful with your money because oftentimes those ups and downs are hard to predict. In order to weather through the storm, you’ll need an excess to cover for yourself until more income comes into the picture to balance that out. Practicality means realistic safety nets.

3. From an outside perspective

How does the rest of the world pay their employees? You may be surprised that American practices aren’t the standard — or even the most efficient — practices for payroll and employee protections. From what I can tell, we can learn a lot from European countries specifically.

Of course, no policy is perfect. However, foreign ideas are definitely worth looking at so you have a different perspective to create your own practices upon. If we’re not evolving, we’re not getting better, right?

Legal requirements in the United States?

First, let’s talk about the legal requirements we already have here in the good ol’ USA to pay your employees. As stated before, companies with 50 or more full time employees are required to offer certain benefits to their workers or face a tax penalty. You can read a summary of the major laws put in place by the Department of Labor here, but among them are standard minimum wages ($7.25/hour — though this is higher in some states), protection of union funds and requirements of union members to file reports, and overtime requirements (time and a half/hour).

I’ll tell you right now that although I enjoy my job, a good part of why I’ve stayed where I’m at is the benefits. Now, in the United States, employers have less requirements to protect their employees than some other countries (see below about the UK), but overall, necessary benefits are still mandatory for big companies.

Essentially, the United States focus on free markets. While great in a lot of ways, it is also a primary reason employees are less protected. Of course, employers want to be able to do what they want without government interference, but unfortunately that allows them to take much more than they can give and in turn people can get hurt. For instance, recently President Trump revoked the 2014 Fair Pay and Safe Workplaces act, which included certain protections for women workers (paycheck transparency and sexual harassment laws are specifically worrisome). As you’ll read below, other countries seem to be more concerned with employee protection than they are with employer freedom in certain cases.

How do European Countries do it?

In Europe, things are pretty different. Obviously, Eurosocialism has a lot to do with pay regulations and employee protections, and the lack of influence by stricter capitalist ideologies is very different. It’s not for me to say whether or not this is totally a good thing because I honestly don’t know or have a fully formed opinion on it. But there are some practices and attitudes I wish US employers cared about more that European employers seem to. First off, I want to look at a country that is no longer part of the EU – Great Britain.

The UK, for what it’s worth, has some pretty savvy employee-protection restrictions on what a company can do in relation to its employees. Employment termination must follow certain rules in most countries outside of the United States — there is no “at-will” termination in simplest terms. There must be employee consultation prior to mass layoffs in the UK, too, and employers must talk to employees before any contract changes occur.

Most of mainland Europe tends toward these differences as well. Glassdoor’s Andrew Chamberlain explained that European employers are much more generous with their benefits than American employers often are. Every country in Europe has maternity leave at a minimum of 14 weeks, for instance. Some countries, such as Finland, offer up to nine weeks of paternity leave as well.

Furthermore, French companies, by requirement, give 30 days off per year to workers. To me, that’s crazy, and I can only imagine that hurts business, but apparently they are much more productive than other EU members. As well, the European standard pay cycle is monthly rather than biweekly. Actually, don’t add this as a European benefit — I hate that.

Asia is growing rapidly but still catching up

I think Asia is worth mentioning just as an example of a continent/group of countries that are still catching up. Of course, Asia is notorious for reduced labor costs (“Made in China” has become synonymous with thoughts of sweatshops) so as a rule it is not a great role model in this fashion. They may look up to us or they may look up to Europe, as more and more American workers and business owners seem to be doing. That said, Thailand has very few significant labor laws. Similarly, Japan has only basic setups and still faces unfortunate gender biases. Thankfully, Chinese labor costs have actually risen, and while benefits may not be at par with where we want, they are growing. Still there is a long ways for Asia to go as a whole. Progress takes time and while we aren’t the best, we’re certainly not the worst. In an ideal world, Asia, North America, Europe, Africa, etc. will grow into more humanitarian labor laws.

How do we use this information for good?

While we can’t change the laws in our own country, we can change our approach to work within the law and provide what our employees need to the best of our abilities. Of course, we don’t want to be taken advantage of or not make any money ourselves, but I definitely see it as a problem if we live lavish lives while our employees scrape by. Here’s some tips to be able to treat your employees more generously (in my opinion, fairly). In turn, you will hopefully keep them around longer.

1. Don’t waste excess money on frivolous things

There are things a company needs and things it doesn’t. Large, prominent organizations like Major League Baseball’s Colorado Rockies buy touchscreens to handle their financial assets and daily operations, for instance. But you as a small business don’t need to buy that yet! I’m certain that careful spending and monitoring cash flow well is crucial to a company’s longevity, as well as helping with employee satisfaction. A great example of this coming from a smaller company, my employers used to throw a Christmas party every year, and last year we didn’t have one. In turn, I got a better end-of-year bonus. Even with my own business, I don’t spend money on subscriptions or assets I can’t afford, even if they look cool or make me appear more professional or “bigger,” mainly because that’d be counter-productive as I can’t afford it. It’s much more important, in my honest opinion, to be reasonable so nobody — including yourself —  is hurt or paid less than they’re promised. If you have to pay someone money you don’t have, you’ll go into debt; do not put yourself in that situation. Be weary of business credit cards, as with any credit card, because your debt can get away from you.

2. Provide proper benefits to the best of your ability

Any time someone asks me about my job, since I am so young, the question “does it have benefits?” is usually brought up in the first five minutes. Some of the most important things you can offer your employees are health insurance, retirement plans, and paid leave. Of course, there’s more to be desired and hopefully someday you will run a company that can offer these employee benefits and more. But for now, try to take care of your employees where you can and always seek to improve that. They work hard for you and deserve it.

3. As your paycheck grows, your employees’ paychecks grow

Your employees are a huge part of why you are where you are, so make sure that as your company grows, so does their paycheck. Furthermore, you should pay them efficiently and on time. Do not take away any raises or pay unless you have to, and try to make up for it as soon as possible. Be transparent with your employees about what you can pay them and can’t, to build trust and good reputation for your business. And ultimately make sure that their paycheck reflects the work they do for you. We’ve talked about stipulations on such a thing but you still want to keep their respect as well as their employment, and good pay is going to be a large part of that.

If you’ve made it through this entire thing, congratulations! But I want to know what your thoughts are on this. Do you think I am totally missing the point? Did you notice something I missed? What is your non-American working experience — from a manager’s perspective as well as an employee’s? How was the pay different? I’d love to hear about it!

About the Author:

Robert Lanterman Robert Lanterman is a freelance writer and musician from Boise, ID. He graduated from the College of Idaho in 2014 with a Bachelor’s degree in Business and a minor in Creative Writing. His writing has been featured on over 50 websites and counting. He has toured the United States with various musical projects and currently runs the record label Hidden Home Records.

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