If you've ever run a company, and especially if you've gone through tough times, you'll know there's nothing more stressful than hiring employees and struggling to make payroll.

And as a business owner, there's at least part of you that probably wants to negotiate hard when you have the opportunity.

Spend less money for the same asset, and your bottom line looks better.

But there's at least one time when you probably shouldn't skimp--when you're better off recognizing that spending a bit more than you otherwise have to can pay off exponential dividends.

For visual evidence, you simply cannot do better than this very short video of Amazon employees' reaction when the company's senior vice president for operations shared the news this morning, in person, with the workers at an Amazon warehouse in Eastvale, California.

I'm just going to get out of the way and let you watch. It's fully worth 20 seconds of your time.

As my colleague Erik Sherman points out, raising wages does a lot of things for Amazon. It's a PR coup for sure.

And it's not cheap. We're talking literally billions of dollars a year extra. Back of the envelope:

  • Amazon says 350,000 employees will benefit from this. 
  • Some are now earning less than $8 an hour. Call it $10 an hour on average. 
  • Now multiply a $5 average raise, times 350,000 employees, and let's say they average 1,000 hours of work a year (which is basically half-time). 
  • Extra payroll calculation: an additional $1.75 billion a year.

It's worth noting that Amazon's stock took a hit today after the announcement, so that's another potential cost.

But the real value is what you see portrayed in the employees' reaction in that video.

These are hard-working people, and a raise like this could have a real, immediate impact on their lives. It's a huge boost. And it not only means extra money, it also means a little bit of extra respect.

Maybe Amazon saw the writing on the wall.

Maybe the company thought, we're likely to see a $15-an-hour minimum wage before too long, so why don't we get ahead of it now.

That's fine. But for its extra payroll expenditure, Amazon just bought something incredibly valuable: employee loyalty and happiness. It's well-worth considering the next time you have to negotiate salary with an employee of your own.

Published on: Oct 2, 2018
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