Ben Todd | Apr 16, 2017 | 3
Is It Feasible To Supplement Employee Pay With Interest From Investments?
Having trouble paying your employees? Maybe you are a small business owner or an entrepreneur and are looking for ways of paying your employees a little extra. You are not on your own, there are lots of small business owners that have to go it alone because they cannot afford to legally hire people. The minimum wage laws mean that unless your employee is hyper-productive and/or profitable, you simply cannot afford one in a small business. It is okay for medium and large businesses that can slot an employee into an already profitable and working mechanism, but a smaller business owner has to work harder when a new employee arrives in order to keep things profitable.
How Can A Smaller Business Afford A New Employee?
There are a few ways you are able to hire new employees even if you cannot afford to pay the minimum wage. Here are a few ideas you can try.
Take out a loan and take a risk
You can take out a loan for the amount the new employee will earn over the next six months. Can you make that employee more productive and able to cover his or her own wages whilst making a profit for you?
Supplement the employees’ wages with investments
Put $500,000 into a fixed rate savings bond for a year and you will earn $5000 per year in interest, which enough to supplement an employee’s wage or hire a part timer. It does mean you need around half a million to start with, but it is an option none-the-less.
Take on freelancers and/or contract employees
You can hire freelancers based on their output rather than how many hours they work. This does mean that the people you hire have to be self-employed, but some people may consider it to get a job, even a low-paying job.
Bringing Freelance Workers Into Your Company
If you are really stuck for ways to employ people without paying them the minimum wage, then hiring a self-employed person may be your answer. The only problem is that you have very little control over such a person. You can fire that person very easily simply asking them not to return, but you cannot penalize them or discipline them for being late or not turning up one day. You can always hang the idea that they may be fired over their heads, but if you are paying less than the minimum wage, then it is not likely to be a scary threat.
Supplementing Wages With Investments
You can do this two ways. You can invest a lot of money and then pay your employee the amount you are paid in interest (as with the example earlier). To create enough interest, you will probably need a lot of money to start with. The idea is that by investing the interest into your employee, that you would see a bigger return from that employee’s efforts than you would if the interest were reinvested in the financial product you got it from.
The other way you can do it is to put a partial payment into a savings scheme. The amount you receive in return will be slightly higher, and that is the money you pay to your employee. The only problem with this is that the employee has to stick around for a little while before seeing an increased wage, but many jobs make employees wait around to be paid higher wages anyway.
Which Investments Should Be Considered?
If you are going to pay your employee wages using the money you have stored already, then savings bonds will suit you. Put a lot of money into bonds and pay you employees with the interest you accrue.
If you are planning on routinely putting money away and paying it to your employees at a later date with interest, then the investing option you choose depends upon your risk tolerance. For example, if you are putting away $100 today with the hopes of turning it into $107 next year so you can pay it to an employee, then it what you invest in is up to you. You can risk it on shares and hope they go up when you sell, or you can try investing in a short-term but lower risk financial product that is being offered by your bank.
Consider Giving Your Contract Employees Other Benefits
If you cannot convince contract employees to work for a lower wage than minimum wage, then consider offering them investing options. It may be difficult to sell this idea to them because they may ask that you give them the money instead of invest it. The other option you have is to give them benefits and perks that other jobs cannot. For example, some people will work for a very low wage if it is a job they enjoy.
Some people will work voluntarily if they think it is for a good cause. You may be able to offer your employees products instead of money, since you get your products at a very low rate. There is also the working atmosphere, or the fact you do not mind if they pick their own hours. You may even allow them to use your equipment and products for personal use. All of these benefits may add up so that people are more willing to work for you on a contract or as a freelancer.
Why Supplement Employee Wages With Your Investments?
It is all about making your money work for you. You could simply give the money you have saved to your employees and hope they help you earn enough back to cover your costs and make a good return on your investment. Or, you can grow your money a little first so that you may pay your employees more in the long run. Or, you can invest your money and pay your employees in the interest or dividends. The idea is that by investing the money into your employee, you will make a return that comes to more than what you would have earned if you had invested the money elsewhere. Sometimes the initial investment in your employees is a little light, and you need to invest and grow the money first before you can even afford an employee.