Your business has started to take off.
It’s taken a while since you joined the ranks of the 30.2 million other small businesses in the US. But now, finally, all of the stress, effort, and hard work is paying dividends.
With revenue coming in and your workload increasing, you’re ready to scale up. It’s time to hire your first employee to help grow the operation to even headier heights. Like all business owners in this position, though, you find yourself asking the following question:
“Exactly how much should I pay my employees?”
It’s a good question too. After all, you have to strike a balance. You need to offer just enough money to attract high-quality candidates without overextending yourself financially. Getting it wrong can have a whole host of negative implications.
Are you trying to decide the right sum of money to pay your new employees? Let us help! Keep reading for our top tips on choosing an appropriate employee salary.
Decide Their Responsibilities
The first step to deciding someone’s salary is figuring out what they’re going to do for your business.
In other words, you want to put together their job description! Sit down to think about the individual roles, duties, and responsibilities they’ll possess.
Will they be doing mundane administrative jobs or complex operational ones? Will they be involved in marketing and sales or restricted to HR tasks, like using a pay stub creator? Do you want them to interact with clients or will they be handling the technical side of the business?
Ask yourself those kinds of questions in order to get to grip with their specific input. The answers should help in the research phase of deciding someone’s salary. More on this coming up…
Investigate Similar Pay Rates
One of the best ways to decide someone’s salary is to look at what other companies are paying people in equivalent roles.
Now, this is where the job description you put together comes in handy. You should be able to use it to identify those similar roles in the industry. Our advice?
Visit the numerous job boards online and do some digging.
Having found a selection of appropriate listings, you’ll have a better idea of what someone could expect to receive from a competitor company. Assuming their business is of a similar size and standing, you’ll have a useful guide to the salary that’s required to attract top talent.
Speak to Other Professionals
Don’t worry if the job boards prove unfruitful! Another effective way to access this key information is to speak directly to other business owners in your industry.
Go to networking events, call up friends and family who have relevant experience, and contact old colleagues. Talk to the right people and they should deliver valuable insight into this decision.
Deciding salary based on a going rate for similar roles in the industry is definitely a viable option. But you could also take a different tack.
Why not think about the contribution of the employee instead?
Remember, new businesses might ask an awful lot of their staff. They may have to do a wide range of tasks that would usually fall outside their area of expertise. Assigning them a fixed salary might not be the best way to reward them for those efforts or incentivize hard work.
A commission-based salary could be a better way forward. As opposed to being based on a set job title, the wage would focus on their impact. The better they do, the more they get paid.
Think About Your Budget
Another vital consideration in this decision is how much money you have to spare.
Providing a competitive salary is all well and good if you’re plush for cash. But it’s another story when your business isn’t generating enough revenue to justify the wage. It’s essential that you can afford whatever fee you end up offering.
Think about how much money the new employee will be worth to your business. Like a coach bringing a new player into the squad, the team member must deliver results that justify the cost.
Calculate how much revenue you expect them to generate. Work out how much easier your life will be with them there. And consider whether or not you’ll be able to cover any future raises too.
Know the Legalities
Another deciding factor here will be the legal obligations you have to uphold.
To put it another way, you don’t have total control over the salary you offer! State laws are in place to protect employees from unscrupulous managers and ensure they provide a fair wage.
Do some research and/or speak to an attorney with experience in these matters. They’ll tell you everything you need to know about what you need to pay your new team member (as well as other important cash-related information). You’ll steer clear of potential trouble down the line in the process.
Ask Your Candidates
Still can’t come up with a concrete figure? Well, you could wait until you meet your candidates at the interview stage to decide once and for all.
Speaking to them should help you assess how much money they’re expecting.
Everything from their current rate of pay, understanding of the position, and reasons for applying will come into play here. Asking about all of the above should prove enlightening. You’ll get a sense of their wage expectations and be able to alter course accordingly with your offer.
How Much Should I Pay My Employees? Time to Find Out!
Huge numbers of new business owners ask themselves “How much should I pay my employees?”
It’s natural! After all, when you’ve never had people on payroll before, setting an appropriate wage is easier said than done. Rather than picking a number from nowhere, you want to know that you’re paying a fair and appropriate sum of money.
Alas, as we’ve seen, this isn’t an exact science. Deciding someone’s salary comes down to myriad factors, such as their specific roles and individual circumstances. Hopefully, though, the ideas in this post will help you do it!
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