To determine the appropriate salary for your new hires and employees, start by setting a range for how much an employee in each position should be paid. The salary range can be based on your expectations and the amount of past work experience that you expect a new hire in that position to have. Consider the following tips.
Do your research. To attract and retain top talent, your salary range should be similar to what other companies are paying for that position. To find out what that means, start by consulting your connections in the industry. Call members of your local chamber of commerce or join a business networking group to meet other business owners and swap salary data. Then review job listings and career boards like Glassdoor and LinkedIn and check Salary.com to see what the nationwide average is for the position, narrowing your search by location to factor in cost of living and acceptable employee pay.
Consider: What level of experience do you expect from your new employee? Seasoned professionals require higher salaries than entry-level workers.
Choose a realistic and affordable salary range. Review your budget. What can you afford to pay? How much additional money will the new employee be bringing in or saving your firm? Identify the maximum salary you can reasonably afford without running the risk of going over budget.
Offer competitive benefits. A flexible benefits strategy is the way to go. Let new employees choose the benefits that are important to them, such as competitive health insurance, retirement savings plans, health and wellness benefits, job flexibility and professional development opportunities. By supplementing salary with benefits and a desirable company culture, you’ll be providing a great compensation package.
What are your job applicant’s salary expectations? Find out if they’re within your budget. Discover this through effective interviews. If the applicant is expecting a much higher salary than your budget permits, it may be time to reassess your expectations or financial means. If the salary requirement is only slightly out of your budget and you see this person as a desirable candidate, highlight additional compensation offered through your benefits package, like better-than-average vacation, remote work options and a high 401(k) match. Employees are often willing to lower salary demands if other benefits are good.
Consider all forms of payment your employee will be receiving. For example, bonuses, which reward people who do an exceptional job, are often tied to specific project results or to overall company performance.
Don’t pay new hires more than existing employees are getting for the same jobs. You’re likely to end up with disgruntled workers. You also risk a discrimination lawsuit if the existing employee is in a protected class — female, minority, over 40, disabled — and the new hire isn’t. Pay at least market rates and consider speaking with your lawyer about any legal restrictions and union contracts.
This is just an introduction; many factors go into creating an overall compensation plan. You may want to work with a professional to make sure you’re giving a reasonable compensation package for your company in your area.