To attract and keep talented, productive employees, you need to compensate employees fairly. Coming up with specific salary figures for job positions requires a lot more than guesswork. Each employee's salary must be appropriate for the duties and expectations of the position, the size of your business and the competitiveness of your local market and your industry.
Your profitability, your overall compensation package and the employee's replaceability are also considerations. To determine a salary:
- Establish a pay structure
- Review salary surveys
- Make adjustments for your market and industry if necessary
- Make adjustments based on the competitiveness of your benefits package.
Establish a compensation planDecide what kind of pay structure you're going to implement: a standard pay structure (fixed salaries) or an incentive-based structure (base pay plus incentives or bonuses). Incentive-based pay is commonly used for sales positions but is becoming more popular with other positions as well.
Tap online help for setting salariesOnline salary sites offer tremendous help when deciding on what to pay for a specific type of job in your industry or location.
Comply with wage and overtime lawsThe federal government and individual states have laws regarding minimum wage and overtime pay. Minimum wage laws in your state may vary for certain professions such as commission salespeople or restaurant wait staff. The government defines employees who may be "exempt" from overtime pay.
U.S. Department of Labor regulations to decide if a position should be salaried or paid hourly.
Don't forget about benefitsWhen establishing pay ranges, weigh the value of additional benefits, such as medical and dental coverage; life and disability insurance; and holiday, vacation and sick leave pay. Small businesses can't always offer the same level of benefits as large corporations, but you can offset that by offering attractive, no-cost benefits, such as flexible hours, telecommuting and a casual dress code.
SBA and find more information about the many types of benefits at BenefitNews.com. The U.S. Department of Labor's Bureau of Labor Statistics offers benefits surveys and resources on its Web site.
Set the parameters of incentive programsIf you choose to implement an incentive-based salary, you need to establish how the program will work. What goals will employees need to reach in order to earn the incentive or bonus? Make a certain number of sales in a quarter?Reach a certain dollar amount in sales each month?
- Small businesses typically pay lower wages than larger businesses, but they offer greater responsibility and opportunity to grow with the company.
- Make sure the salary and market information you review is current.
- Offset lower wages with benefits, such as senior-level titles, an important role and a variety of responsibilities.