Salaries, like most things in life, are negotiable. But where do you even begin?
An employee’s or candidate’s salary depends on a myriad of factors: how much relevant industry experience he or she has, what the candidate can bring to the table, what a fair pay scale is, and how much of an investment you’re making in your company’s future.
Here are a few tips on how to set salaries:
1) Check the stats – The U.S. Bureau of Labor & Statistics publishes a National Occupational Employment and Wage Estimate. Here, you can view a database of over 800 occupations, with data classified using the Standard Occupational Classification (SOC) System.
2) Know what different employees earn – Comb through the pages of relevant industry magazines for how much to pay employees at different levels of your business; these trade publications usually offer an annual salary issue.
3) Offer a salary based on performance – Whether you’re hiring a salesperson or a business development expert, determine what high-level employees can mean to your bottom line. If they bring in enough business, what’s a fair salary to pay them? For example, if someone sells $400,000 to $500,000 worth of your company’s products or services annually, a low six-figure salary is justifiable. But base it with salary plus commission, perhaps on an escalating scale so the more they sell, the higher their commission.
4) Pay by the hour – Temporary staff, retail clerks and assembly line employees are usually paid hourly because their work can be easily tracked by their time. So start with the minimum wage and determine what’s fair on top of that.
5) Be flexible – Offer your employees flexible hours, extra vacation time, let them telecommute once or twice a week, and even reward them with creative job titles (such as “IT guru” instead of “help desk admin”). All of these don’t cost you much, but they give your employees more reasons to love working for your company.
6) Throw in bonuses and stock options – For employees who are worth far beyond what they’re earning, think of incentiving them with annual cash bonuses and stock options or shares of your company. By rewarding them this way, they’ll become more loyal.
7) Include partial ownership – If you’re closing in on retirement and no family members are in line to take your place, consider offering your star employees who are most senior or valuable a piece of the ownership pie.
As always, it’s a good idea to consult a labor or employment law attorney whenever a question about paying employees arises.