Employers raise pay to find workers

Nearly two in three people at the nonprofit LifeScape hold the same jobs: direct support professional.

"There's really no one more important in our organization," said Walter Schaefer, vice president of human resources. "They work directly with the person we're supporting, so they're in someone's home helping with daily living."

The organization, which is the result of the merger of South Dakota Achieve and Children's Care Hospital & School, has more than 600 direct support professionals. At one point this summer, there were between 80 and 90 job openings for those positions, Schaefer said.

In response to the growing need and the projected need for more staff members as LifeScape adds housing, the organization raised pay.

It increased the starting wage for the position and added another pay hike after an employee has been on the job for six months.

"They're trained and hitting their stride," Schaefer said. "That's when you hate to see them go."

The organization also increased pay for almost all of its existing direct support professionals and offered bonuses for employees who referred successful hires.

"It was quite a commitment. It took a lot of discussion," Schaefer said. "It was a pretty significant piece of the budget to make a one-time increase like this pretty much across the board, but it was something we felt we needed to do to get where we need to go."

A growing number of businesses and organizations are starting to pay people more. For some, this year's increase in the minimum wage mandated it. For most, a tight market for workers is starting to force wages up.

"Most of them are telling us they're desperate," said Darrin Smith, the city's director of community development, whose department surveyed several businesses late last year. "They can't find people. Some are increasing wages as much as they can to see if it helps. Some have done that. It helped, but it didn't solve their problem."

Raising pay

About a year ago, Harold Boer gave almost every employee at Rosenbauer America a pay increase. For many, it meant an extra dollar an hour, a 6 percent raise.

"By raising everyone, we were able to raise our starting wage as well," said Boer, president of Rosenbauer America and CEO of Rosenbauer South Dakota.

Rosenbauer manufactures fire rescue vehicles north of Sioux Falls in Lyons and sells them worldwide. The company has more than 250 employees and wants to hire five or six people. Boer said the bump in pay has made some difference.

"It was a little easier to hire workers," he said. "We're right now going to analyze the turnover rate for those hired within the last two years. Traditionally, if we keep them two years, they're more likely to be here 10 or more years."

When he raised pay, he also made it easier to earn vacation.

"Time off is as important as wages, so to keep the younger generation motivated and keep them here, we bumped that, so within a few years they have a good vacation built up already," Boer said.

But he still aggressively recruits, even hanging up small posters at area grocery stores, convenience stores and coffee shops.

"It's one of the more successful things we've done," he said. "We ... termed it a career upgrade. Anybody who wants to work has a job, so we've got to go after people who want a change and aren't satisfied where they are, whether it's wages or boredom or travel. In our factory, it is not assembly line by any means. It's custom built. You have to be able to think on your feet, and you see a finished product when you're done."

The local wage environment recently was a topic for the board of the Sioux Empire chapter of the Society for Human Resource Management, which is conducting its biennial wages and benefits survey this year. While the recent increase in minimum wage didn't impact many of the employers, competitiveness for workers is prompting them pay more.

"We're having to bring people from around the country because the people in the market are getting gobbled up so fast they're just not available," said Justin Rey, human resources director at Heritage Bank NA and past president of SESHRM. "It's tough for all industries. (For) engineers it is extremely competitive."

His bank also increased wages for loan and mortgage originators.

"Those are definitely key ones for us. Good salespeople, our customer-facing people, that's where the money has to go," he said. "We try to pay as competitive as we can just like every company out there, but you do get to a point where you say, 'This is the best we can do.' "

Customer service positions also have seen a bump in pay, according to Greg Johnson, who manages the Sioux Falls office of the South Dakota Department of Labor and Regulation. At the end of the third quarter of 2014, the average customer service representative in the city made $13.42 per hour.

"A year and a half ago, that was a lot closer to $12 an hour, and that in itself is really significant," he said.

Retail absorbs increases

At Valentino's on West 41st Street, owner John Jones already is noticing the effect of the minimum wage increase, which raised starting pay from $7.25 to $8.50 an hour for non-tipped employees and from $2.13 an hour to 50 percent of the minimum wage, or $4.25, for tipped staff members.

Jones had a few employees making the minimum wage.

"It's a good place to get a first job for a 14- or 15-year-old," he said. "But now the wage is high enough that unless I make a big adjustment to my pricing, I can't afford to have them. As a business owner, I have to decide, am I going to jack my prices up high enough to cover my labor needs?"

He has raised his carry-out prices and is considering other price adjustments. He's also dealing with a 25 percent increase in his pasta cost.

"It would be really bad if gas hadn't dropped," Jones said. "Now, people have more expendable income and everybody else is raising their prices, but they've got more money to spend so that's OK."

Charlie Kneip, who owns Cherry Creek Grill and TC's Referee, decided not to raise prices until he sees the full effect of his wage adjustments.

"So we're going to have to come up with the money, and in my restaurants it's substantial," he said. "Between the two restaurants, it will be $50,000 or $60,000, and I don't feel the full effect because I didn't pay the minimum."

His restaurants enjoy good employee retention, he added.

"So obviously whatever we're doing is right to take care of employees."

When Costco Wholesale Corp. entered the market in late 2013, it also changed the landscape by offering starting pay at $11.50.

"Costco had a pretty significant effect," said Smith, the city official. "We heard that, both positive and some who said, 'We had to raise wages a buck or two because of it.' "

Other retailers also are raising wages as they try to recruit workers, said Shawn Lyons, executive director of the South Dakota Retailers Association.

"The competition for labor has never been greater," he said. "We always felt the discussion on minimum wage was a misnomer because the marketplace really took care of itself with regard to those individuals that businesses were trying to attract and retain. That's not going to get any easier in the coming year."

The state's new minimum wage law also requires an increase each year based on cost-of-living adjustments identified in the consumer price index. Lyons said there is some concern among retailers that wages will become compressed, and they won't be able to afford to pay experienced employees and managers enough to attract them.

"Do they have to change retail prices, menu prices, to make up for that gap? That's a very real possibility, and we're hearing those effects right now," he said. "The other aspect is what those small businesses do to give back to community causes, sponsoring sports teams and things for schools. Those aren't scare tactics. Those are very real things we're hearing from businesses right now."

Total package

The employers that discussed the issue at the Society for Human Resource Management meeting are finding themselves trying to weigh how higher pay ultimately will affect their balance sheets, Rey said.

"We're all sitting in meetings with our executive teams and trying to figure out what do we do because the company over there is paying an extra amount of money, and you look at your benefits and your bottom line numbers. All it takes is one rough year, and you're sitting there going, 'What are we going to do? We've got to cut costs.' It's a challenge."

For nonprofits such as LifeScape, increasing pay also might require more robust fundraising. Schaefer said he was able to cover the most recent wage hike through savings in health insurance because of his healthy workforce and projected savings in overtime because staffing will increase.

"I absolutely had to find the dollars," he said. "We really can't increase prices on the customers. We've got the budget we've got. And I can't reduce staff because there's a certain level of support people need."

While Mary Medema, director of workforce development for the Sioux Falls Development Foundation, hasn't heard of large-scale wage adjustments at many businesses, she's finding those that have increased starting pay have been reluctant to advertise it.

"The candidates don't have a clue what the starting wage is because employers don't reveal that," she said. "They have to market their jobs as creatively as they market their products."

At Heritage Bank, Rey said the company tries to pay as competitively as possible but also tries to create a work environment that entices people to stay.

"We focus a lot of time on building relationships directly with our employees," he said. "So when they're looking at a couple dollars more, they're saying, 'My supervisor cares about me. It's a great work environment. My co-workers care about me.' "