5 Reasons Why Making Lowball Offers is Counterproductive

It's easy to turn to expenses associated with employees as the first place to make cutbacks when you're operating on a tight budget. Organizations do it all the time, they issue layoffs, cut benefits, and lowball salaries. Yes, expenses associated with employees are costly, but like any other investment, you need to put something in to get your ROI. If you want to attract the best talent, keep them engaged, and enjoy stronger employee-retention rates, you'll want to make, at the very least, fair and competitive salary offers.

Making lowball offers is a counterproductive tactic. Here are five reasons why:

1. You’ll waste time during the hiring process

As you know, the interview process is not cheap. According to some statistics, the average organization spends about 52 days and $4,000 hiring an employee. That doesn't include all of the sifting through resumes, doing interviews, and having follow-up conversations. Lowballing a salary offer during this process is probably going to result in the candidate moving on and taking a position with a company offering a healthier paycheck.

2. You’ll see a revolving door of employees

Even if you do manage to find a qualified candidate willing to take a low offer, chances are that person is going to run to the nearest exit the minute a better opportunity arrives. So, not only have you lost out on the time and expense recruiting and onboarding this person, you've also spent time training him or her. Did you know, the cost of employee turnover is, on average, about 20 percent of the person's annual salary? Take the number of employees who have quit to head to greener pastures, and do the math. If you find the figure is something you hadn't factored in your overall expenses you might want to reconsider any past lowballed offers you may have made. Then realize you are now back to square one and have to start the costly recruitment process all over again.

3. You’ll experience lower productivity

Even employees who do stick around, at least for a little while, are likely to be less engaged if they feel they aren't being paid their worth. A lowball salary essentially tells the employee, "We don't feel you're worth the money." After all, you get what you pay for. Consider, what employees would invest all their energy in a job where they don't feel valued? Chances are, they're spending energy looking for a new position. When they find it, they'll stop dialing it in, and instead, call it a day, and walk out the door. Not to mention, if you have disengaged employees, your level and quality of customer service may be suffering, affecting your good name and brand.

Fun fact: Did you know 44 percent of employees said they would leave their job if another organization offered them a raise of 20 percent or less?

4. You’ll become known as "that" company

Ideally, you want to attract the best talent. However, if you consistently offer great candidates subpar salaries, word of mouth is eventually going to get around. Either candidates or former employees will tell others about their experiences. Alternatively, others who were lowballed may take to the web and post their comments on job websites. Did you know many job seekers will form their opinions about a company after reading just six reviews? Before making your next lowballed offer, consider—do you really want to become known as "that" company, the one that doesn't value its employees enough to pay them fair market share?

5. You’ll see your competitors benefit from your lowball offers

You lowball the best-qualified, talented and experienced candidates and they'll probably turn down your offer. Especially if you've posted high expectations to go along with that lower salary. Where do you think candidates will go next to apply to be hired? Have you thought about how much it will cost you in the ongoing recruitment process or through watching your competitors snap up the best talent?

How are you budgeting for salaries? Are you looking at industry trends and what the skills you are seeking are actually worth in the job market or are you just looking at your own bottom line and offering salaries based on what you think you can afford to pay? Even though on the surface it may look as if you're saving money by offering low salaries, in the long run, are you really saving?  It's better to be realistic with your job expectations and design them to commensurate with salary.

One thing some employers seem to forget is good employees are assets, not liabilities who impede their bottom lines. Don't sell great candidates short. In return, you'll more likely to be rewarded with happier staff, lower employee turnover and, in the long run, you'll save money. Plus, you'll become known as the place talented people want to work.