How Much Should You Pay Your Employees?
Whether you’re bringing on your 15th employee or just hiring some extra hands for your busy season, compensation is something to think through carefully. First and foremost, there are labor laws, like minimum wage, to which you must adhere. But you also want to make sure you’re compensating people fairly for what they bring to the table — while staying within your budget. Pay too little and valuable employees won’t stick around. Pay too much and you’ll overextend yourself.
So before you even begin your search for candidates, make sure you’ve done the legwork to decide what the pay is for the job you have open. Here’s some homework that will help you decide what to pay people:
Write a solid job description.
The first step in deciding what to pay people is to write a solid job description. You may think it’s an entry-level position, but after writing out all the responsibilities, you may realize it’s actually a role that requires some deeper experience.
While every job description inevitably varies from business to business, yours should also be comparable to the job descriptions for similar roles within your sector (say, a “sales associates” at clothing boutiques in Austin).
This is especially true for the job title. The word “manager” in the title usually means a higher-level position (read: higher salary), while “assistant” is usually for someone who is just starting out. Check to see what other businesses in your city and market are listing as job titles, and try to match yours closely to those templates. This helps job seekers gauge positions against their skill set and helps you figure out compensation per the industry standard. If you’re at a loss for how to write a job description, search local online job boards for some ideas on how other businesses have structured theirs.
Do some market research.
In addition to looking at how other companies structure their job descriptions and titles, you’ll also want to do some research to see what the job market is like for the position you want to fill. Look at local guides, surveys, and sites like Glassdoor to figure out what the average compensation is for the role in your city and industry. Talk to other business owners and see what they pay for similar jobs and responsibilities. If a certain skill set (like engineering, for example) is in high demand, you may need to pay more for those candidates.
Check your budget.
After you have a good idea of what the competitive landscape is like, check your budget to see if you can afford what might be required to hire an employee for that role. If it’s more than what you allotted, it’s time to revisit things. If you absolutely need a specific skill set, you might think about adjusting the position to be part time, or adding in other incentives like a bonus structure or attractive benefits. You might also consider hiring someone with less experience whom you could train to grow into the role. Then you could offer that person more when he or she takes on more responsibility.
Decide on a range for salary or hourly wage.
Now that you’ve written your job description, researched the job market, and checked your budget, it’s time to decide on a range for the position’s compensation. It’s often a good idea to add this range to the job posting. For example, you could say something like “$15 to $20 per hour, commensurate with experience.” If the role offers commission or benefits, be sure to mention that as well. Specifying the range of the position’s hourly wage or salary helps you bring in a solid pool of talent whose experience is likely to match the position. If a candidate you like has less experience, perhaps you offer the lower end of the spectrum. If another has more experience, you might land towards the higher end.
As you bring on new employees, be sure to familiarize yourself with the basics of payroll and labor laws.
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