One of the hardest decisions you will ever make as a business owner is how much to pay your employees. This quandary forces you to balance your desire to maximise profits, with the need to properly compensate your workers for their efforts.
When hiring for a role, how do you decide what salary to offer? There are so many factors that go into this decision, and there is no right or wrong answer. And the figure doesn’t have to be set in stone. You might offer a more experienced applicant a higher salary than someone who has newly graduated from university.
To help you come up with a fair and appropriate rate of pay, here are some of the factors you will need to take into account.
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Experience and Qualifications
The more relevant experience and professional qualifications an applicant has, the more in demand they will be. If they have a master’s degree, decades of experience, and an impressive track record, you cannot get away with paying them minimum wage. They will simply find a company that pays them what they deserve. On the other hand, if the applicant is just starting out in their career, their salary expectations will be lower. When they start working on your company payroll, they will gain experience and they should receive a rise in pay accordingly.
The Job Market
If you’re completely unsure how much to pay an employee for a certain job role, take a look at online job boards and your competitors’ career web pages. See how much other firms are paying for similar roles. Use this as a guideline to help shape your job description. Today’s applicants are aware of their worth, and will know if you are paying less than the going rate for their position.
Your Own Finances
Ultimately, the amount you can pay an employee will depend on what you can afford. And this will differ from business to business. A global corporate bank will be able to pay a marketing manager a huge salary, whereas a small high street charity will only be able to pay a fraction of this amount. Work out the maximum you can reasonably afford to pay your new hire, as well as the minimum acceptable amount for their experience and job role. Their salary will lie somewhere between these two figures, guided by their experience, enthusiasm, and commitment.
The Job Description
What duties and obligations will your new hire have? How essential is their role to the success of your business? Are their skills unique and in high-demand, or could anyone do this job? The answers to these questions will help you determine how much they can earn for their work. If they are expected to work long or unsociable hours, this should be reflected in their pay.
Future Development
An employee’s salary is never static, and should be reviewed at least once each financial year. As they continue to work under your payroll, they will gain experience and skill, and their income should rise proportionately. It is important that any employee is paid a fair amount, and that they have the opportunity to develop and grow with your business.
*Disclaimer – This is a collaborative post.
