Can you under-pay people and still retain them?

Can you under-pay employees and still retain them?

Answer: for many companies it is very difficult to retain employees for a decent length of time if you are consistently paying less than market rates. But in certain situations it is possible to put together an attractive employee value proposition than involves a salary that is less than they could get elsewhere.

So really you need to think about the alternatives available to your employees, and their preferences regarding aspects such as travel, working hours, working conditions and so on. A few quick examples: if you hire an employee who lives in the local area and isn't interested in travelling long distances, then the fact that your competitors, based 100 miles away, are offering higher pay, is not likely to tempt them to want to move. However, if your competitors are located 1 mile away then it will be a rather different story.

If you are the only employer offering flexible working hours, and perhaps the chance to work from home one or two days a week, then you are more likely to be able to retain good employees despite paying less than they could get elsewhere.